Canada’s wealth is dependent on natural resources – the discovery, extraction, processing and transportation of them, but also their use in industries like construction and manufacturing, which are the economic engines that drive the global economy.
The natural resources industry is currently experiencing a period of downturn and when investment slows, the search for resources, and thus prosperity, is forced to go to greater depths and more remote, northern environments, which pose a unique set of problems for the industry to contend with. Most of the accessible and easily exploited deposits have been explored and tapped, and now, exploration activities are more complex, in more challenging terrain and isolated environments, requiring companies to look deeper to find value, navigating complex relationships to do so.
When costs are high and prices are low, this can have far-reaching implications for the entire mining ecosystem and global supply chain at large, and simply relying on the return of prices and demand cannot be a long-term solution to ensure sustainability and viability for the industry moving forward.
Rising costs, including electricity rates and transportation costs (which increase the further north exploration activities go), weak demand and low prices are diminishing the wealth accumulated in the natural resource sector and are having an impact on prices of secondary commodities as well, such as equipment, homes, cars, computers and other electronic devices as they account for increasing costs. Challenging market conditions are slowing investment dollars and thus, the degree to which new exploration activities are taking place. This is especially challenging for smaller companies that have fewer resources to begin with. Larger companies are better poised to weather downturns like these and can instead focus on existing deposits rather than seeking out new deposits with no promise of return.
Global market conditions, however, are only one part of the equation. Looking to the Canadian and Ontario resource markets more specifically, it’s not just a matter of slowing investment that is posing a challenge: there are countless forces at work contributing to this challenging season for the mining and resources sector.
Mining and resource companies in Ontario are faced with challenges related to regulatory uncertainty, issues of jurisdiction, gaps in infrastructure and high operating costs. Electricity costs alone in the province have increased significantly over the last few years.
Likewise, as easily accessible existing deposits are exploited to capacity, companies are forced to go deeper in long-lived mines with more technical and dangerous conditions, or to go north where deposits are harder to access and more costly due to insufficient infrastructure, uncharted and untamed terrain, and inclement weather.
Ontario has a new mineral development strategy to become the leader in sustainable mineral development and production which will effectively serve as a blueprint to guide the industry to have efficient and effective regulations and to be competitive, innovative, safe and environmentally responsible while also being profitable. Acknowledging the importance of northern infrastructure to the operation of the mining and resource sector, $1 billion in public funds have been dedicated to improving access to the Ring of Fire, which is where countless deposits have been found, including the first major chromite discovery in North America in the James Bay Lowlands.
In the first ten years alone, the government expects the Ring of Fire to generate up to $9.4 billion in gross domestic product (GDP) and to employ more than 5,000 people. The project has the potential to result in significant revenue for every level of government, but in order to reap the benefits, investments must be made and relationships must be built. Investments in transportation, communications and energy infrastructure are necessary to not only explore and retrieve the deposits, but also transport them to market, which will likely include rail, marine and highway transportation infrastructure.
Further to investments in infrastructure, the government is responsible for a clear and streamlined investment process and can work to ensure regulatory certainty by serving as a liaison between investors, various government ministries and First Nations communities whose lands are of interest and must be protected.
Ministerial uncertainty can lead to overlap and confusion regarding who to consult, which poses major barriers to development in northern regions. From a jurisdictional standpoint, natural resource governance falls under provincial jurisdiction, but First Nations relations are with the federal government and to protect their treaty and land rights, they look to the Supreme Court of Canada.
Companies and governments have a duty to consult First Nations, whose traditional territories have protections including the consideration of environmental and social impacts of the project and meaningful engagement in the decision-making process. Projects require, “the free, prior and informed consent of the aboriginal peoples concerned,” according to UN Special Rapporteur James Anaya in 2013 and as such, environmental assessments have become a necessary part of any resource development project.
Matters like these are protected human rights, though there is no real framework from which they are formally safeguarded by the Canadian government, as witnessed in the RCMP’s approach to deal with the ongoing dispute between Wet’suwet’en, Coastal Gas Link and the Canadian Government.
The approach to resource development can be as varied as the number of First Nations’ communities there are, so it is important for companies to consult each to ensure there can be consensus reached as to how a development can move ahead and how the benefits of that project will be distributed. It is also important for the government and investors to respect the rights of the community to those benefits.
There are many examples where the company and the community have come together through consultation and engagement to establish impact benefit agreements (IBA) to ensure interests are protected. IBAs can include compensation arrangements, revenue sharing agreements, and reassurance that the community will have a certain amount of project involvement and control.
Beyond economic benefits that can be derived, communities can benefit from employment; however, just as a lack of infrastructure is an issue when looking at exploration and mining activities, a lack of funding, infrastructure and access sometimes leaves the members of the community undereducated and underskilled for the available positions, meaning the labour is outsourced, as are the benefits therein.
Labour challenges continue to persist as not enough qualified candidates are available, indicating the need for additional educational resources to support northern advancement in this regard. Though the mining sector is the largest private sector employer of First Nations’ people in Canada, there is no correlation between high-paying mining jobs and the health and prosperity of a community. There is no promise that the wealth and prosperity derived from a project will remain in the community; in fact, it can produce the opposite effect. Referred to as the helicopter model of development, when companies come in with helicopters to fly in the necessary capital, supplies and labour to support a project and just as easily fly the resources and the benefits out of the community, no wealth is generated locally. And where there are worker camps to fill gaps in skilled labour, there are higher instances of missing and murdered indigenous women (MMIW).
An equitable and sustainable mining and resource industry requires good faith in the consultative process, clearer jurisdictional and regulatory guidelines and an approach to industry that promotes positive outcomes without sacrificing economic prosperity, the natural environment, and the community.
Instead of exploiting a northern location and its resources, developers are best served when they promote collaboration and engagement, and succeed when backed by the government to ensure they have the information, infrastructure and resources necessary to build relationships with First Nations’ communities that can be mutually beneficial.
It is true that the costs of doing business up north are higher and more effort is required to sustainably develop the deposits that are there, but through the entire supply chain, exploration, production and transportation to markets, it is important that any investment brings long-term prosperity and benefit to Canada and northern communities instead of serving as a temporary boost to the GDP.
Innovation will also play a role in the sustainability of mining and resource extraction provincially and Canada-wide in terms of the new technologies, products and approaches that can be developed to address changing market conditions. Norway has proven to be a bright example of how government-led innovation, new technology and modern thinking can result in a profitable and sustainable resource industry.
Only companies with sufficient capital can undertake riskier exploration activities and have the innovative capacity to address the new challenges that emerge when tapping into existing mines, but all companies have the capacity to consult and ensure that projects are developed sustainably, in accordance with human and environmental rights and in compliance with treaty obligations.
Over the next decade, the Canadian government anticipates that there will be upwards of 600 major resource development projects, which means great effort must be taken to ensure that high costs, low prices, jurisdictional challenges, relationship building, innovation and other environmental and technical barriers won’t stand in the way of prosperity and wealth generation for all project stakeholders.
