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by Michael Kelly

UNLESS ITS PROFITABILITY
picture changes for the
better, there may not be a
mining industry in B.C. in
the near future. .
This what B.C. Mining Associ-

ation president Tom Waterland

fears in reviewing the past dec-
ade of -the industry’s financial
performance. According to the

annual Price Waterhouse report

on the B.C. mining industry
issued for 1990, the after-tax
return on shareholders’ invest-
ment for the industry as a whole
has been in the red seven years
out of the last 10. The best
performance was in 1988, when
mining investments in B.C.
ylelded 14.1 percent.

Pointing out that Guaranteed
Investment Certificates or Treas-
ury Bills would have given a far
better return, Waterland said in
an interview in Terrace last

week, "You need a minimum of ©

18 percent, otherwise we won’t
have an industry. The future
depends on overcoming prob-
lems in profitability."

And what is the nature of those
problems? The Price Waterhouse
teport, which cites an aggregate
loss of $95 million for the B.C.
industry in 1990, says the
decline has mainly been caused
by a combination of low metal
prices on the world market and
the high value of the Canadian
dollar. Every cent the Canadian
dollar gains over the U.S. cur-
rency costs mining in B.C. $25
million over a period of a year.
Currency markets and world
metal markets are beyond local
control, but Waterland thinks

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there-are some things that can be
done to make mining and the
production of mineral products
less difficult and expensive than
they are now.

Most of those things fall under

the category of what Waterland
terms "the regulatory environ-
ment", an environment largely

created and controlled by gov-

ernment. "Looking back, we had
programs in the 1970’s that
made Canada one of the premier
mining jurisdictions in the
world," he said. Changes during
that decade persuaded Waterland
to go into politics, and he rode
the Social Credit wave of 1975
into the B.C. Legislature as the
MLA for Yale-Lillooct. During
the 10 years that followed he
served in three Cabinet posi-
tions: agriculture, mines and
petroleum resources, and forests.
Although that government
reversed many of the mineral
and land policies enacted by the
previous New Democrat admin-
istration, Waterland feels that in
the end the Socreds also created
a hostile environment. "We got
rid of the [NDP] legislation, but
over the years other things hap-
pened. That government turned
out to be very unresponsive to
the mining industry." .

One thing the industry needs,
he says, is the assurance of the
ability to mine once a mineral
discovery is verified. "It costs an
average of $45 million to outline
an ore body. When you add in
the rest of the costs it comes to
a substantial amount, the cost of
getting title. After all that, you
expect the assurance of the
ability to mine, and right now
that assurance is not there," he
said.

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‘Exploration crews and geol-
ogists are often the first people
to seriously examine remote
areas, and Waterland finds it
ironic that the attention caused.
by a mineral discovery often
draws attention to other values

‘in areas previously ignored. The

process frequently ‘places a
reserve on the discovery area,
the mineral values are balanced
against a.determination of other
values, and if the mineral values
lose the mine is never devel-
oped, . |

The process acts as a deterrent
to exploration. "Historically,
mineral discoveries were always
ahead of mineral development.
Over the past few years, it’s
been the reverse," he said. The
implication is that when ore
bodies currently being mined are
exhausted, there will not be
enough new discoveries to keep
the industry afloat.

"It doesn't bode well,” Water-
land remarked. "Exploration is
down each yéar. We need rea-
sons to explore, and they’re not
here now. There are many uncer-
tainties: the value of minerals,
aboriginal land claims, the alien-
ation of land through parks and
reserves,” He noted that miners
as a group aren’t particularly
opposed to the settlement of
native land claims in a manner
that favours native interests.
"We don’t care if the natives
have title as long as they under-
stand us."

. Another arm of government
policy is the stringent set of
criteria that has to be met before
an ore body can be brought into
production. The B.C. Mine
Development Review Process is
one .of the best in the world,

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Terrace Review —- Wednesday, November 27, 1991 5

Waterland says, and it allows the

industry to demonstrate on a

case-by-case basis that it can
look after the social and envi-

‘ronmental impacts of developing

a mine. In recent years, how-
ever, that has changed. "We now
feel that the MDRP is the prel-
ude to an arbitrary decision," he
said.

Duplication of process between
the federal and provincial gov-
ernments is another unnecessary
headache that is costly to both
the taxpayers and the mine deve-
lopers. Prospective mines some-
times need to go through virtual-
ly the same process twice: the
provincial MDRP and the federal
Environmental Assessment and
Review Process. Waterland is
lobbying for the two levels of
government to define their indi-
vidual responsibilities and estab-
lish a protocol.

Finally, Waterland thinks gov-
emments need to acknowledge,
in policy, that mining simply
isn’t like any other industry. In
the past, he said, there have
been successful programs based
on the inherent high risk of
mineral exploration and develop-
ment. Flow-through shares — a
program that allowed investors
to write off 133 percent of
losses in mineral exploration
investments — fuelled an explo-
ration boom in the late 1970's
and early 1980’s that resulted in
numerous major discoveries. The
program was eliminated by the
federal government four years
ago. Developing mines used to
be granted a tax holiday by the
federal government during the
first three years of production,
an acknowledgement of the

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expense and risk of finding an —

Financial woes killing-industry, mining rep says

ore body, defining it and making
it a producing mine.

"Governments have to recog-

nize that it’s a high risk busi-
ness. Other businesses, for
example, can be built up with
government assistance and then
have the use of existing infra-
structure, like roads and utilities.

"We want to see a tailor-made
policy in recognition of mining’s
uniqueness, both in regulation
and taxation. There has to be
certainty of mineral tenure and
the right to mine. We have to
get away from regulatory dupli-
cation, and there is a need for a
very specific policy regarding
infrastructure," he said in sum-
mary.

On the positive side, he said,
B.C. has the best geological
environment and diversity of any
jurisdiction its size in the world
and it is home to the best mine
operators and developers in the
world. It also has the advantage
of a stable political climate, and
Waterland said he does not
expect to have problems dealing
with the new NDP government.
"We're going to take Harcourt at
his word. I hope he succeeds,
because in order to do that he
will have to encourage the min-
ing industry," he said.

Waterland was in the North-
west to address the Kitimat
Chamber of Commerce, and he
considers public education about
mining one his most important
functions. "The policies of gov-
ernment and the attitude of the
public have to change," he said.
"People actually know very little
about mining, and my job is to
tell them about it. Ultimately,
it’s the public attitude that is
reflected in government policy."

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