There's a lot at stake for Ontario as it tries to map out the potentially lucrative future for its mining sector. But as the province's former premier Bob Rae said recently, it's more important to get it done right than to get it done fast.
Ontario's current Premier, Kathleen Wynne, was bending Prime Minister Stephen Harper's ear about this issue Thursday afternoon, urging Ottawa to help the province finance the estimated $2-billion cost to build the infrastructure needed for the rich Ring of Fire mineral deposit in a remote region of northern Ontario that, for starters, is devoid of the roads and/or rail lines that are absolutely essential to realizing its massive potential.
The company that looked likely to launch an investment and development spree in the Ring of Fire, Cliffs Natural Resources Inc., recently suspended its operations there, amid uncertainty about the infrastructure plans and delays in environmental and First Nations approvals. That gave a new sense of urgency to the province's efforts to get things moving, and to recruit Ottawa to help.
All of this comes against the backdrop of the province's continuing review of its Mining Tax Act. Ontario has the lowest taxes on resource extraction of any province, and understandably (especially given its persistent budget deficits), it wants to generate more revenue. It has dragged its feet on introducing a new structure, partly in light of the sharp downturn in commodity prices; but as the Ring of Fire push grows, the province is going to need to deliver clarity on just how big a pound of flesh it intends to extract from companies who want to exploit Ontario's mineral riches.
Which brings us to Quebec – which is doing a fine job of giving Ontario a model on what not to do.
Quebec's minority legislature continues to wrangle over a new Mining Act, but what's not at issue is the financial crux of the bill: Higher royalty taxes on mineral production (while dangling the carrot of a tax break for miners who are willing to set up processing facilities in the province). While the details will be different, this is very much what Ontario is contemplating. And there's evidence that the plan, before it has even been enacted, is scaring off mining investment in the province.
A survey of mining companies, released Thursday by the Fraser Institute, showed that Quebec had slumped to 11th spot in rankings of the most attractive place for mining exploration in the world, down from first place just three years ago. Miners cited the regulatory uncertainty and rising taxes as key deterrents to investment in the province. The declining view of Quebec has coincided with an actual drop in exploration spending over the past two years, as the province has repeatedly explored tougher and more tax-heavy mining legislation.
Ontario can ill afford similar missteps as it tries to stickhandle the Ring of Fire from dream to reality. Infrastructure financing won't count for much if the province tries to take too big a tax bite for its troubles, and sends investors looking elsewhere – as, apparently, Quebec has been doing.