STANDING COMMITTEE ON RESOURCES
Mr. James DeWolfe
MR. CHAIRMAN: We will call this meeting to order. You have the agenda before you which covers the next couple of meetings as well. Before we begin, I think it is in order, first of all, to have our committee members introduce themselves for the purpose of Hansard and for the purpose of our guests; it was brought to my attention that at the last committee meeting, members were not talking into the microphones and they were having great difficulty in recording this. I would just ask that the presenters, as well as the members, kindly speak up and don't be shy. I certainly want to welcome the presenters and thank them for coming out this morning.
Before we start, let's introduce ourselves, starting with Mr. Morash.
[The committee members introduced themselves.]
MR. CHAIRMAN: We have Colleen from Hansard and Darlene Henry is the organizer of this committee and coordinator and clerk. You have all kinds of titles this morning, isn't that great?
The format, gentlemen, is fairly standard for our committees and I think some of you have been here before. We will have 15 minute presentations followed by an opportunity for committee members to ask questions. Certainly at that time I would like to dispense with formalities and keep it rather informal and hopefully we will have a good exchange of information, dialogue that will be beneficial to not only the committee members, because some of us on this committee are new as MLAs and some of us are still on the learning curve, and hopefully it will be beneficial to you, the exchange of ideas.
So without further ado, I would like to ask the members who are sitting at the table now to please introduce yourselves and tell us where you stand in government or industry, who you represent and your titles, please.
MR. SCOTT SWINDEN: Mr. Chairman, I am the Executive Director of the Minerals and Energy Branch in the Department of Natural Resources.
MR. TERRY DANIELS: I am the Managing Director of the Nova Scotia Chamber of Mineral Resources.
MR. KIM CONRAD: I am Director of the Chamber of Mineral Resources of Nova Scotia.
MR. SWINDEN: Mr. Chairman, perhaps I can introduce two of my colleagues over there, who don't have microphones, who have come to also help answer questions that the members might have. John Campbell is the Manager of Mineral Development and Policy in our group and Mike MacDonald who is in charge of mineral promotion. John knows a great deal about mineral production in the province and Mike is our fount of wisdom about the exploration industry in the province.
MR. CHAIRMAN: Thank you, gentlemen. Have you decided who is going to start the presentation?
MR. SWINDEN: Yes, I guess I will start.
MR. CHAIRMAN: Okay, Scott, I will turn the meeting over to you. Oh, you are going to have a slide presentation as well?
MR. SWINDEN: What I would like to do is just talk a little bit about the mineral industry in Nova Scotia, both a bit about its past, in the context of Canada as a whole and then a bit about how mining contributes to the economic well-being of Nova Scotia. I think perhaps it is not widely appreciated, the extent to which the mineral industry contributes to the economy of Nova Scotia and I would like to offer a few numbers from our group and a few ideas about how this works.
What you see here is a picture that you may not often see from this perspective. That is the aggregate quarry at the Strait, Martin Marietta's quarry. You can see it normally when you drive across the causeway. What you see are the gravel piles on the shore. What you don't always see from the road is the quarry up top from which the aggregate is derived and that is our only aggregate export operation in Nova Scotia. I believe it is the seventh largest quarry operation in Canada.
Mining has been a part of the economic well-being of Nova Scotia for a very long time. There are records of coal being recovered in Nova Scotia as early as the 1600's but the first commercial operation that we are aware of was actually as early as 1720 when they were mining coal at Port Morien to keep the guys warm in Louisbourg. We exported coal as early as 1724. There is a record of a shipload of coal going to Boston in 1724 and it wasn't long after that when there are records of coal being developed on the mainland of Nova Scotia as well, in the Joggins area.
By the early 1800's, we had a thriving coal industry in Nova Scotia and communities were starting to grow up around the resource. It remains an important component of our mineral wealth and we are currently producing something like 3 per cent of the total coal in Canada.
Another commodity which has been very important for Nova Scotia in terms of its mineral wealth is gold. Gold was first discovered in Nova Scotia, as far as we can make out, in the late 1850's. The first commercial production of gold was in 1860 and it started a gold rush in Nova Scotia which was about the same time as the Caribou Gold Rush in British Columbia. It was about 30-odd years before the Klondike Gold Rush and only just a scant 10 years or so after the California Gold Rush.
The initial discoveries were made at Mooseland. These were quickly followed by more discoveries all up and down the eastern and southern shores. Over the last 140 years, Nova Scotia has produced over 1 million ounces of gold and it continues to be an important attractant for exportation investment in Nova Scotia, when the price of gold is better than it is now, of course. But gold does very well for Nova Scotia.
The reality is that over the years Nova Scotia has produced quite a wide variety of mineral products. We are not producing all of these at present but we have produced most of them in the recent past. We have a bit of a formatting problem on the slide but that is okay. In terms of metals, Nova Scotia has, in the past, produced copper, zinc, lead, silver and tin, of course, from the mine down at East Kemptville near Yarmouth, as well as a wide variety of industrial minerals like gypsum and salt, both of which are major contributors to our economy right now.
Barite is an interesting one. We produce barite for a number of reasons, including pharmaceutical purposes. We have a pharmaceutical grade barite deposit near Brookfield, near Truro, where they make barium enema products, basically. It is a very high grade, very pure product. We are also producing barite in Cape Breton for use in drill muds. Barite is a very heavy mineral so when you put it down in the mud in an undersea drill operation, it stays down and its specific gravity is what makes it valuable.
We also produce a number of other industrial products such as silica, peat, limestone, various kinds of stone, aggregate, diatomaceous earth and slate.
When we think of mining we tend to think about the hole in the ground but, in fact, mining is an industry which is quite a bit broader than that. Mining professionals tend to think of mining as a cycle rather than as a point source. Mining starts with exploration. Without exploration there can be no mining. Exploration is the part of the industry that renews the wealth that provides for resources for the future. Exploration, of course, is looking for a hidden target. It requires a large amount of area to look in, in order to find the very few valuable plums that are hidden under the surface of the earth.
When exploration is successful, we go to a development phase where there is a lot more detailed exploration work being done on the deposit, trying to delineate it and estimate its value. Assuming we get to the point where we have a resource that can be economically mined, we go into the mining phase and then eventually we go from mining to reclamation;
an essential feature of any mining plan these days is a reclamation plan. We are working very hard to ensure that modern mines are properly reclaimed, and the land is then available for use for another purpose.
Mining is huge in the Canadian context. In terms of the Canadian economy, mining produces almost 4 per cent of the GDP in the country, almost 16 per cent of Canadian exports are mineral products and they contribute $7.1 billion to Canada's trade surplus. Mining directly employs 368,000 Canadians, and in fact, that is only the tip of the iceberg because studies show that for every job in the mining industry, there are three or four others in the service industries that arise from that. It is a very high-wage job, average earnings in Canada are over $1,000 a week, and mining supports 128 communities across Canada.
One thing that isn't really appreciated often about mining is the level of productivity. Mining is a highly productive industry, mainly because of the great degree of technology and mechanization that is now being employed in the industry. Statistics show that 4.2 employees can generate $1 million, and that is compared to the Canadian average of 9.2 employees to generate the same amount across the rest of the economy. Mining has a major impact on other sectors as well: 55 per cent of Canada's total rail freight revenue comes from the transport of mineral products; 61 percent by volume of all the products loaded at ports for international trade are mineral products.
Alas, the Canadian mining industry is presently in a serious state of downturn resulting from a number of factors which I don't want to go into a lot of detail, I suspect perhaps Terry will talk about this in more detail, but we are in a period of persistently low metal prices, as most of you are probably aware. Perhaps more seriously, we are in a period in which Canada's market share of global equity investment in mining is declining seriously, that is more and more equity investment is going offshore to other countries, other jurisdictions where the investors perceive a better advantage.
Exploration expenditures in Canada were down 29 per cent between 1997 and 1998, and it looks like they are going to be down another 30 per cent between 1998 and 1999. This is serious enough in the short term, of course, for the expenditure and exploration, but it is very serious for the long term. We are not doing enough exploration in Canada to replace our reserves, at present. The inevitable result of that is the same as when you spend your capital.
Minerals are important to Canada as a whole, but minerals are a provincial resource according to the Constitution, the provinces own their mineral resources. In Nova Scotia, that is the case as well. So mineral resource management is a provincial responsibility. We carry out our resource management responsibilities through a number of instruments. We have a Mineral Resources Act, which lays out the parameters of how we manage the resource. We have a mineral policy, which states the things that government intends to do to support the mineral industry and to derive the maximum benefit from it.
We have a Mineral Rights Registry which is basically our claim recording office. It allows us to issue licences and leases for the minerals that we own. We have a geological survey, which provides us with the geo-science information that we need in order to promote and attract investment and exploration to the province and to provide the support that it needs once it is here.
I would now like to talk a little bit about the industry in Nova Scotia and the state of the industry. The last year for which we have final figures is 1998, and in that year Nova Scotia's mineral production was valued at $347 million. The chart there shows a graph of production since 1985, broken out in three areas of commodities, coal; non-metals, things like gypsum, salt, limestone, barite, those kinds of industrial minerals; and then the structural materials, which are basically aggregate, sand and gravel, crushed stone, things like that.
You can see that over the years, there was a peak in the late 1980's and early 1990's, and that was largely a peak in coal production, and also, we had some metal production at that time as shown by the green on the top of the bars, gold and zinc, which we don't have at the present. Otherwise, the non-metal sector and the structural materials sector have both remained fairly stable over that time. This is something that to some extent buffers the Nova Scotia industry, if there are ups and downs in coal, and particularly ups and downs in metals; we have a fairly stable non-metal sector that continues on pretty much through the good times and the bad. That keeps the Nova Scotia industry from experiencing the wide up and down swings that you see in some provinces where metals are the major product.
If you look at the value of mineral production by commodity - and these are 1998 figures - the coal bar, of course, will be smaller this year, but coal is still the dominant feature of our metal industry. However, gypsum is extremely important. We produce something like 75 per cent to 80 per cent of Canada's gypsum and 7 per cent of the world's gypsum, we have the largest gypsum mine in world out of Milford. We are a major gypsum producer in the world, and gypsum is an important part of our mineral economy. Salt, of course; we have
two salt producers. We produce limestone and gypsum which is used for cement, a lot of aggregate, and other materials as well.
As a province, we derive revenues from the production of these minerals, and this summarizes those revenues. It has averaged somewhere between $1.5 million and $3 million since 1984. The coal figure will obviously be lower. These are 1998 figures, fiscal 1997-98, so we were producing almost in full production in coal at that time.(Interruption) The royalties for coal and the royalties for salt and the little green bar is all the other things that were too small to show. For gypsum, it is not a royalty, and the reason for that is that gypsum is not defined as a mineral under the Mineral Resources Act. We derive a revenue from that through the Gypsum Tax Act, and it is actually a per-ton tax, by any other name, but it is not strictly a royalty. Nonetheless, gypsum is the major contributor in terms of government revenues of our mineral products.
To give you a sense of where we are mining in Nova Scotia, and the answer is a lot of places, and this is a slide I could leave up for a long time and talk about, but I won't. Just to point out that our major gypsum producers, of course, are in the Windsor area and in the Musquodoboit Valley and in southern Cape Breton. We have two salt-producing salt mines at Nappan and at Pugwash. We have a number of coal producers, as you can see the yellow stars, this is Evans over here, the Devco mines here, the Pioneer Mine at Stellarton.
I guess the point here is that mineral production is all around us, and perhaps we don't always realize that almost anywhere we go we can find people producing some mineral product that is being used in our society. Some of these are quite large, some of them are quite small, but they are everywhere.
Interestingly, in terms of wages in Nova Scotia, we see the same trend that we saw in the national trend, there are 3,300 jobs in the industry right now and the average weekly wage is just over $800. It is lower than the national average, but higher than most other sectors in the province, nonetheless. These are, of course, full-time jobs and they are also jobs, to some extent, in the rural parts of the province. They are important to Nova Scotia and to the economy.
One of the interesting statistics about Nova Scotia, if you look at it, is that Nova Scotia, of course, is a very small province, and you look at our mineral production and you think well, that is not very much compared to what other provinces are producing, but of course, we don't have very much land either. If you average it out per square kilometre, what you find is that except for New Brunswick, Nova Scotia probably derives the most benefit per square kilometre in terms of minerals of its land of any province or territory in the country. New Brunswick, of course, has the mines at Bathurst and this pumps their value way up. I think, when you look at it in this light, Nova Scotia, albeit a small industry, is making pretty good use of its mineral endowment on a per square kilometre basis.
If we turn to exploration for a minute, exploration, as I said, is the lifeblood of the industry. Without exploration there will eventually be no mining. This is, perhaps, not an easy graph to understand, but the red bars are Nova Scotia exploration, in the tens of thousands of dollars, so the high bar there, that is about $46 million, this would be about $15 million down here. The black bars are Canadian, and they are on a different scale, they are on millions, so this is actually $500 million and this is just over $1 billion up here.
The point here is not the actual numbers, the point is that the Nova Scotia trend, of course, shows an upward trend, and then a decline to the mid-1980's and then a peak back through the mid-1990's and then a decline again. That is exactly the same trend that the Canadian exploration trend shows overall. The point here is that the mining industry and the exploration industry in Nova Scotia is not disconnected from the rest of the country, it follows the same trend that the rest of the country does, and to some extent at least, the ups and downs that we experience are ups and downs that are a national feature not just a provincial one.
We have a number of interesting exploration plays going on in Nova Scotia at the present. These are just a few of the, perhaps, more prominent ones. You have heard, I am sure, of the titanium sand project in the Minas Basin, up here, looking for titanium minerals in the sands of the Basin.
We have a project down here in which they are looking for kaolin, another in Yarmouth County and another one, perhaps a more prominent one up in the Musquodoboit Valley in which Kaoclay Resources is also looking for kaolin. We have a very large project going on the North Mountain looking for zeolite. Zeolite is a mineral that you would use - it is an environmental mineral. It has pores which will take up deleterious substances. You can use it for all sorts of things. They feed it to cows so that the gas is not as foul, how do we say this diplomatically? They use it as cat litter. They use it to spread in various situations where there is an environment problem and the zeolites will take up the materials.
There is a golden base metals project in Cape Breton happening right now and there are a number of other smaller projects around the province, a number of small gold projects that are sort of on hold, waiting for prices to stabilize at higher levels. So we expect to see a continuing exploration in Nova Scotia on projects like this for the foreseeable future at least.
You might ask the question, why would people want to come and explore in Nova Scotia. Nova Scotia has a number of distinct advantages with respect to the mineral industry. First of all, of course, is its location. With industrial minerals location is everything. We are close to deep-water ports almost everywhere in the province. You can take the stuff out of the ground, put it on a boat and send it to a market almost anywhere. We have a proven resource base for a number of important commodities, gypsum and salt, barite, various metals and the potential for new discoveries.
We have a good infrastructure almost everywhere. The mining company does not have to build a lot of roads. It does not have to go a long way to find towns, services and supplies. We have a skilled and experienced workforce from a very long mining history. We have a good strong prospecting community which is out daily looking for new discoveries and we have a well developed geoscience database within the Department of Natural Resources which can be used to help promote the resources and to help people make the best use of them once they come here.
The proof of the pudding is in the eating, of course, and the fact of the matter is that we have had a number of important new advanced projects just in the last five years or so. I am not going to go through these one by one but I think the point here is not the individual projects but the point is that there are a lot of minerals. People are out looking around, trying to find opportunities, finding those opportunities and actually investing in them and developing them. These are all advance projects of one kind or another that have taken place over the last five years or so.
The industry, nonetheless of course, faces a number of unique challenges in Nova Scotia and I am going to use this more as a lead-in to Terry's presentation, I guess. There are a number of things that I think we need to keep in mind that are challenges for the industry in this province. Overall, of course, is the declining Canadian share of exploration investment which, as I showed, affects Nova Scotia as it does the rest of the province. In Nova Scotia we have a very large proportion of private land. This is unique in the country except perhaps for P.E.I. and it creates an extra level of permission that people have to have in order to explore. You have to have not only the mineral rights but you also have to have permission to go on the surface. This is perhaps a level of permission that is not necessary in most other provinces and to some extent creates perhaps a disadvantage for Nova Scotia in the eyes of the industry.
In Nova Scotia, as elsewhere in the country, there is, I think, a limited public understanding of the industry. We have a communications problem. The mining industry has a communications problem everywhere in this country I think and the public by and large does not understand the industry very well and does not appreciate the benefits that are derived from the industry in the province. This contributes to a negative public image, particularly in Nova Scotia, I think. Finally, there is the issue of Aboriginal land claims which will undoubtedly be a major issue for our industry as for the other resource industries in probably the very near future. This is an issue that the industry, of course, highlights for us as something that they would like to see dealt with.
I would like to finish my part of the presentation by simply inviting you to an event which is taking place next week. This is our Mines Branch, we used to call it our open house, we now call it our Mining Matters for Nova Scotia Conference. It is an economic development conference in which we try to increase awareness among the populace of the importance of mineral resources, to promote opportunities for economic development people
and minerals people to get together and to showcase our geological programs. It is a public event. Everybody is welcome. We would be more than happy to see any of you there who would like to come to the World Trade and Convention Centre next Monday and Tuesday. Thank you very much.
MR. CHAIRMAN: Thank you very much, Mr. Swinden. We will move on to the next presentation. I think that is the best way to go since we have quite a bit of information to cover, quite an overview, and then whatever time we have left at the end we will field some questions.
MR. DANIELS: Thank you, Mr. Chairman. On behalf of the mining industry, I would like to say that we appreciate very much you people taking the time and inviting us here today. It is an opportunity that we certainly welcome. As you are well aware, the mining industry in Nova Scotia, as Scott has said, is linked tightly to the national industry and to the global industry. It is impossible to talk about the industry here in Nova Scotia without reference to what is going on nationally and around the world.
In the last two years the Canadian mining industry has had a rough go. As you know, price takers in the market place and low prices for coal, minerals and metals have taken their toll. Company profits are down. Some companies' properties and operations have closed. Some are in receivership and the ones that are still going are doing marvellous things to keep going.
[8:30 a.m.]
The turmoil in Asia over the last two years has had a severe impact because they use a lot of our products, our minerals. You say, so what, the industry is cyclical in nature, this goes on every five years, what is new? Well, there is something different this time. There is a major structural shift taking place. It is still in progress. It is a combination of a lot of things. I am not sure that we fully understand it yet. I do not, I know that, but something is different this time and I think we are into uncharted waters as to what the industry will - certainly there will be a recovery, there is no question about that - look like in that recovery this time I do not think we can predict.
If we are to optimize the benefits so that mining can contribute to the Gross Domestic Product of Nova Scotia, then what can we do in Nova Scotia? I think the answer is we have to ensure that we have the right policies and programs in place in the province to compete for exploration dollars around the world. We are moving into a new millennium in a couple of months and we are all optimistic, as I know you are, that we are going to grow and prosper.
How successful the mining industry is in Nova Scotia in the future will depend in large measure on the policies that you people formulate in the Legislature and the policies you put in place. Make no mistake about it, you are in a very powerful position with respect to the mining industry.
I think Scott has touched very well on the economic benefits of the industry to our economy and I will not repeat what he said there but one of the interesting things that has happened in the past few years in conjunction with the changes in the economics of the mining industry has been the new technology that has come into play. The mining industry has been a leader in the business community in adapting technology in any way, shape or form it can. This has paid off. One of the unintended benefits of that, I suppose, or consequences is that now the Canadian mining expertise is highly sought after around the world. Of course, that is good and it is bad. It is great in the sense to know you are wanted but there are a limited amount of dollars and expertise out there and it is going into foreign countries and other lands rather than staying in Canada.
This shift has been driven by a number of changes and these changes I am going to mention here are global. They are in terms of government policy, mineral law related to privatization of steel and mineral properties, access to land, environmental processes and some relative uncertainty with respect to those and the attractiveness of geology. So as we move to globalization, there are things happening all over the world that are driving us.
Canada, in general, since 1993 has experienced a period of sustained growth and this is due in large part to the ability of the national government to eliminate the deficit and to get the economic fundamentals right. Unfortunately, not all regions of the country have shared equally in the successes this exercise has provided for. Some provincial governments are still
struggling to get their financial houses in order. Nowhere, I guess, is that situation more critical, as you people are well aware, than here in Nova Scotia; however, we are very encouraged by strong signals by government that no effort will be left untried to balance the budget.
We, the people of this province, have to recognize that our future prosperity and well-being depends upon government providing us with a level of services commensurate with what we can afford. We have high hopes that you people are going to get the thing turned around. We are hopeful that an increase in the economic growth will soon be under way but commodity prices are still weak and continue weak. For example, nickel dropped 39 per cent in price between July 1997 and July 1999; in the same time-frame, copper dropped 40 per cent; zinc, 30 per cent; lead, 29 per cent; and gold, 26 per cent. I know there is cautious optimism out there that these prices are on a trend back as demand in Southeast Asia particularly increases, but it is a very erratic upturn. There is not a big strong level of confidence there yet that we are going to continue that way.
In exploration, Scott has shown by his graphs, back in 1987 there was close to between $45 million and $50 million spent on exploration in Nova Scotia. The figure I have for 1997 is about $7 million. What is significant there is the magnitude of seven times. We are at one-seventh now of what we were, so I guess to me what it shows is there were a variety of things that came into play to create that expenditure of $50 million, but we are a long way off from that now. It would be nice to get back to recover some of that lost ground.
In the industry we desperately need an infusion of exploration dollars; however, it is going to be a major task to get any significant increase over and above current levels. Major companies are severely strapped for cash, and junior companies, the backbone of the exploration industry, are heavily courted for their exploration dollars by jurisdictions all around the world.
My phone rings and I get talking to somebody in Vancouver or somewhere about exploration in Nova Scotia and the response is I am not even thinking about Nova Scotia on this day; I don't even have a map on my table. These are people who know the province well, some were born here and have worked in the province. They are the kind of people who if there is any way they could get here they would be spending somebody else's money so they could get a trip home to see the boys, but they can't do it.
It is not a problem unique to Nova Scotia; it is a problem that is Canada-wide. It is estimated that Canadian companies will spend U.S. $10 billion on foreign exploration over the next five years. That compares with U.S. $3 billion in Canada during the same time-frame so we have to compete for that $3 billion. It is interesting to note that in 1992, internal domestic spending in Australia and Canada by junior exploration companies was the same. It stood at about 60 per cent of total exploration expenditures. By 1997, Canada dropped to 28 per cent while Australia had increased to 68 per cent. The answer to that is Australia took a conscious decision that in addition to building an internally recognized industry, they wanted a strong and vibrant mineral economy at home. So the Australians said to the boys, this is great, we are pleased that you are becoming recognized around the world, but we want to work with you to keep as many dollars here as you can and it has paid off.
Nova Scotia has a lot of good things going for it. On the plus side, it is well-positioned to track investment. The geology is favourable; there is excellent potential for certain metals, especially zinc, gold and industrial metals, structural materials and fuels; we enjoy a stable, consistent, legislative framework complete with an up-to-date Mineral Resource Act, Environmental Act and associated regulations; and the geography and climate supplemented by a good transportation of rail and road service which connects to superb all-weather ports makes it relatively inexpensive to access markets. Natural Resources maintain one of the best geological databases in the country. The province has world-class deposits of industrial minerals with proven production records. The workforce is highly skilled and there is a reputable service industry present in the form of consultants, contractors and suppliers. Costs associated with staking recording fees and land acquisition are all very reasonable. Then
we have the equity tax credit which is available to small business. The availability of natural gas form the offshore introduces new, interesting possibilities for value added.
In the present mining matters format, an annual conference - which you were invited to as Scott closed his presentation - is first-class. It is a great opportunity to sell the mineral industry of this province. The only flaw is that we would like to see more people from outside of Nova Scotia attend but that is no fault of the conference. The conference is an excellent forum and I don't know of any better in the country. I think if we could just get those out-of-towners coming here from Vancouver, Toronto, and so on, and the exploration managers who make key decisions so we can work on them, maybe we can get some dollars out of their pockets.
I talked about the good things we had, our strengths but we also have some challenges. One of the problems is we have not had a major discovery in the province for some time. The last world-class metal discovery was the East Kemptville tin deposit. I guess there is a herd mentality that takes over if you are fortunate enough to have a major discovery, for example, Voiseys Bay and Labrador, nobody was in Labrador until that discovery and then suddenly everybody moved in and wanted a piece of the action. There is nothing like success to attract success.
We have had some issues in the province that have created some negative impacts within the industry and we are well aware of what those are. We have had Westray and the Jim Campbells Barren and tremendous debate over parks and protected areas. Make no mistake about it, every word that was said and discussed went coast to coast and around the world, we are well-known for those things. Of course there is broad public misconceptions out there regarding mining and its impact on the environment. Efforts for government to deal with these problems has sometimes led to a perception by investors that Nova Scotia is generally not in favour of mining activity. I guess sometimes it is not what we do, it is how we do it. It is the old adage, it is always a struggle to make sure everybody understands what is being done. I find myself on the phone many times in discussion saying no, no, that is not really the way it is at all, that is your perception of what is out there and the way it is but it is not really like that. It is interesting.
We are generally perceived as a province that is not proactive in promoting the mineral exploration industry to the extent other jurisdictions in Canada do. A perception exists that those persons charged with formulating economic policy within government do not have a full appreciation for the up-side potential for boosting the economy by encouraging a strong, vibrant mining industry in the province.
At the present time there is no junior capital market in the region. This requires local entrepreneurs to travel outside the Atlantic Region to negotiate for exploration dollars. The one-window approach, designed to expedite applications for license and permits is in need of
some examination and overhaul. The very problems it was designed to eliminate continue to reoccur. In a minute I am going to talk about some possible solutions to these things.
As I said before, we are very pleased the government is determined to get the financial affairs of the province in order. I think that is the single, most important factor there is out there, not just for mining but all business, we are no exception. If we can get the economics right, then and only then can we hope to achieve a standard of living and accompanying service that the people of the province have come to expect. We have a tremendously high level of expectations and I don't envy your job in coming to grips with that; it is tough.
Now we in the mining industry want to be good corporate citizens; we are willing to do our part in creating a strong and robust economy in the province. An increased level of mining and mineral activity will create well-paying jobs, as you know, and stimulate the service supply and consulting sectors of the economy and government revenues will be enhanced. Now this is not a good time for the mining industry to be asking government to undertake costly programs in support of mining or mineral exploration; in fact we think that would be an irresponsible thing to do. Indeed we believe that a significant positive impact can be achieved within current spending envelopes; we think there is a lot that can be done that will not be a major cost to them, and that is what we are going to outline and propose to you today.
We would like to see a strong signal from government that mineral exploration and development are welcome in Nova Scotia; that will go a long way to restore confidence with investors. Manitoba, New Brunswick, and Newfoundland are good examples of jurisdictions where this has been done with great results. The process of approving permits and licenses needs to be made to work in a timely manner. The one-window approach designed to give industry one entry point to all agencies and departments is flawed. It would appear that no one representative is accountable for the whole process. This results in each agency proceeding at its own speed, and it is very easy to make the excuse that when buddy calls to see about his permit, the other guy is holding it up. There needs to be a governor on the system. One office holder, if you will, or one person you can go to who is in charge of scheduling and time lines for getting things done.
We would like to see staff from Finance and Economic Development - and this is true of other major central planning departments - subject to briefings from staff from Natural Resources on a regular basis. We would like to see staffs from these departments encouraged to interchange in positions in those cases where it is possible, and I am thinking in the area of policy, for example. We think this would, over time, strengthen the understanding of the mining industry within central planning agencies; in other words, if these people could come and go from one department to another they would develop a better understanding of the mineral industry.
We think Natural Resources should be encouraged to take a much more proactive stance and utilize their exceptional geoscience database, one of the best in the country, to encourage mining and mineral exploration in the province. A direct linkage should be made to the existing mineral policy. The promotional plan should emphasize opportunities to attract small-or-medium sized mining companies to the province and dedicated promotional events could be targeted at specific players.
Think small. Nova Scotia is a relatively small province and the population is widely spread across all the counties. To minimize conflicts with other land use activities, the emphasis should be placed on developing small-and-medium sized mining operations. The geology and geography of the province lend themselves well to this concept. There is experience in the European countries that have proven that this approach works well, and I am thinking of countries like Ireland, Sweden, and Switzerland, who have had positive experiences with this approach.
Access to land for exploration is essential if mineral exploration is to flourish. We need to develop a multiple-use concept with respect to land use. Before any lands are set aside for any special purpose, the mineral potential of the area under consideration should be thoroughly examined to determine its economic potential. We often feel that people who are charged with making hard decisions with respect to land use are forced to do so. Time-frames and pressures tend to put them in a position where they have to make a decision without having a full knowledge of the geological potential of that area, and one thing is, to develop that knowledge tends to take time, more time sometimes than is available for a decision to be made.
We think in all fairness that the Legislature should have at its disposal all possible knowledge about any given area that is to be withdrawn, including the mineral potential and the economic potential. When I say all, I mean all, all other areas should be there too for you so that you can make a proper decision.
Final decisions with respect to the creation of restricted areas should not preclude the possibility of mineral exploration. Rather, emphasis should be on how to achieve conservation objectives and still permit other activities such as mineral exploration to take place. We have made tremendous advances in technology and operating know-how that enables us to conduct mining-related activities with minimal impact to the environment. In order to redirect the flow of investment capital from foreign to domestic locations, some type of investment tax incentive is required. Since this responsibility is primarily with the federal government, we would encourage you to lobby the federal Minister of Finance to develop a plan that would support exploration for minerals in Canada.
Aboriginal claims are the source of much uncertainty within many sectors of our economy and certainly in mining. We encourage you to lobby hard to have the Government of Canada resolve outstanding Aboriginal issues in a timely way.
The government is currently studying the feasibility of bringing the Workers' Compensation Board together with Occupational Health and Safety to create a new organization. The mining industry welcomes this initiative and hopes that this plan proceeds. A proven example of how this can work is the model used in New Brunswick.
Finally, underground mining regulations in Nova Scotia have been subject to extensive review and consultation and it is time to proceed to enact the changes that have been widely discussed. That, gentlemen, is briefly what I wanted to say and we would be pleased to take any questions.
MR. CHAIRMAN: Thank you, Mr. Daniels and Mr. Swinden. I have noted that John O'Sullivan has joined our team during the presentation. John is President of Rainbow Resources and the Director of the Chamber of Mineral Resources of Nova Scotia. Now we will go into the question period. I believe that ends the presentations that you have for us today.
Just before we go on I want to say that the mineral industry has contributed far more to this province than most people understand and I, for one, recognize the benefits of the industry to our local economy, having worked in the industry myself with some of these gentlemen for 30 years. I certainly hope that my colleagues at this table have a better understanding of it thanks to your presentations and the input we are going to get during the next hour.
In terms of employment and investment, it has made a great contribution. I recall some years ago where we would have over 100 exploration companies working in any given summer. I am disappointed to see we are in a downturn right now. The exploration is a big part of it, there is a lot of money left in this province by the exploration companies. I was just wondering and perhaps I will direct this to Mr. Swinden, it was indicated that we would go through these five year cycles and how do you see it going? We are not sure if this is one of those cycles we are in now, perhaps it is something else. I, myself, am quite optimistic that this industry is going to continue to be a major contributor to our economy and I just wonder how you feel about that?
MR. SWINDEN: I would agree with that. I think the industry has the potential to continue to make a major contribution. I think if you look back to the days of the last 1980's when we were getting $45 million a year in exploration, of course that was a bit of a special time. Those were the years of the flow-through share program. Flow-through shares by their nature, as most of you are probably aware, would return 133 per cent of the investment to the investor so there was a considerable incentive to invest in speculative ventures. There was a particular incentive to invest in gold. The one thing that Nova Scotia does have in great abundance is good prospects for gold. So there was a lot of money being spent in Nova Scotia on gold. It went up very quickly with the flow-through shares and it went down just as quickly when the flow-through disappeared.
There is still good potential for gold. So there was a lot of money being spent in Nova Scotia on gold then. It went up very quickly with the flow through and it went down just as quickly when the flow through disappeared. There is still good potential for gold, the potential hasn't gone away. We often compare the gold potential in Nova Scotia to that in southern Australia. In southern Australia, with very similar geology over a very similar area of similar kinds of deposits, they have produced substantially more gold than Nova Scotia has and it is probably a function of the fact that they explore differently and have a different concept of how to go about it and perhaps go in with a little bit deeper pockets when they start.
Obviously with the price of gold in the $250 to $275 range, we can't really expect a whole lot of exploration for gold but there is some optimism that the price will go up and certainly if the price does go up above $300 and the industry develops a confidence that it will stay there, then we will certainly see exploration for gold again and we have a number of advanced projects on existing gold deposits which are basically just waiting for price and for an investor to go.
We have an excellent potential for zinc. That is perhaps another key thing because zinc is a metal which right now, at this point in time, is being highlighted by the industry as an area of potential growth. We have the former Gays River mine, which many of you will be familiar with, the former mine at Walton. That is an environment which, on a world-wide basis, can host world-class - whatever that means - deposits; in other words, deposits which large companies world-wide are interested in exploring for. As part of our Mining Matters Conference this year, we are having a one-day symposium on zinc the day after the conference and we are hoping that this symposium will attract companies from outside Nova Scotia to come and take a look. We had two major international companies come and visit us through the summer, interested in zinc, and we did one-day presentations for them on potential and we are hoping that will lead to some new exploration.
So there is potential in metals and I am optimistic that when prices improve we will see new activity and perhaps new mines. Beyond that there, of course, continues to be tremendous potential for the industrial minerals. Nova Scotia's location gives us a tremendous advantage in production of industrial minerals because a large component of the value of industrial minerals is the transportation cost. If you have to ship it a long way on a truck or any other expensive means, then you have a problem. But if you can stick it in a boat, then you can take it anywhere, as we have proven with the Martin Marietta Aggregate Quarry at the Strait and there is potential for more of those in Nova Scotia, as the gypsum industry has proved over and over again; the salt industry proves it as well and there is potential for other kinds of industrial minerals developments too. I would be surprised if we go back to $45 million a year exploration. I don't see that in the near future but I don't expect to see the exploration industry die by any means and I am optimistic that it will continue to grow.
MR. CHAIRMAN: Thank you. Just a point to both you gentlemen, we have four other gentlemen here with a great deal of expertise and if you are referring any questions to them, I would ask them to take this last chair down here so that we can have it recorded, just at the end of the table here, if you would pull in there to answer the questions, for the purpose of Hansard.
We will start out with questions. Mr. Taylor, did you have your hand up earlier?
MR. BROOKE TAYLOR: Mr. Chairman, I appreciate the opportunity to listen in this morning to your presentations. I am interested in a couple of areas in my backyard. I don't mean to be parochial but for quite some time now we have been hearing about the kaolin clay deposit and the exploration that is going on. I am just wondering when, or if, we are ever going to get to the development stage of that minable reserve. I understand it holds a lot of potential for this province in terms of jobs and economic benefits.
MR. MICHAEL MACDONALD: The kaolin clay is currently being conducted by Kaoclay Resources; maybe I can give you a little background on that and just back up a bit. A couple of our geologists in our department were conducting a regional survey of the three- dimensional geology so they were doing some drilling to try to establish what was under the ground when they came across some fairly good looking kaolin clay deposits in their drilling. So they conducted a preliminary study to see if there was a potential use or clay deposits in their drilling. So they conducted a preliminary study to see if there was a potential use or application for these kaolin deposits. Initial results indicated that they could be used for the paper industry and as other fillers for a multiple of uses. It is used in rubber, for making porcelain and a number of different commodities. They conducted a fairly extensive study, this would have been back in about 1994-95, I am not sure exactly of the time-frame but in that time area.
What they did was they presented their information at our annual conference, which is now called Mining Matters, and at the time, some of the local investors came and saw their presentation and were quite encouraged by this new discovery of kaolin. The following day, they picked up the mineral rights to the kaolin in the Musquodoboit Valley area and the Shubenacadie area, and then proceeded to initiate a fairly systematic exploration program.
This is currently continuing. They are still drilling, and what they have done is drilled it on a very systematic grid spacing to try to determine - this is routinely done, the equivalent deposits in Georgia are currently being used in the paper industry. Georgia has an extensive kaolin industry, with similar types of deposit. Routinely, in those areas, they do drill on grid spacing of a couple hundred feet.
It takes a fair amount of time, and they are currently drilling in a very detailed pattern to establish the exact size of these deposits. While they are doing that, they are still conducting some secondary processing and evaluating the use of the kaolin for paper. It has
a lot to do with the quality, the grain size and various other physical aspects of the clay, in terms of what can be used.
I guess, to answer your question, the project is still going on. We are awaiting the results of that study.
MR. TAYLOR: I have another question or so, but if other members wanted to ask . . .
MR. CHAIRMAN: Perhaps we should bounce around. Mr. Epstein.
MR. HOWARD EPSTEIN: I had a question for Mr. Swinden. I noticed in your mining cycle that you lay out a number of different aspects of what you see as the full mining operation, but something that wasn't included did however get referred to in your talk, which is value added. What I am wondering about is to what extent there is any value added associated with our mineral industry right now, and in addition, whether you can lay out for us where you see potential for value added? It is obvious there are some problems, if we are just in the business of exporting raw materials, because we are missing out on the opportunity to add value to the resource that we have.
MR. SWINDEN: I might ask John Campbell to speak to that in a moment, as well, but to start answering your question, yes, there is some value added going on in Nova Scotia. We have a wallboard plant at the Strait which utilizes Nova Scotia gypsum. It is not a large proportion of the gypsum by any means, but the value added to a very large extent is a function of the market and what can be afforded, and the economics of shipping gypsum versus the economics of shipping wallboard are quite different. If your major market is in New England or in Europe, then the relative economics of shipping the gypsum to a wallboard plant versus producing the wallboard and then trying to ship the wallboard are not always favourable. That is really something that the market determines.
I would obviously like to see more value added with respect to that part of the commodity taking place here, but realistically I think it is something that the market will determine. John, do you want to address that a bit more?
MR. CAMPBELL: I think you touched on most of it Scott, but in the province we do use limestone for cement, we do use the gypsum from Cape Breton for the wallboard plant at the Strait, we do use barite as final product for drilling mud, and we do produce, as Scott said, an enema - grade barite that is shipped to the States. We do produce brick, final product, from silica and clays mined in the province, and we do produce slates, cobblestones, and building-product-grade stone for facades, sandstone and whatnot. With the introduction of natural gas there are other opportunities as well with a reasonable supply of reasonably costed energy source. We may have the potential for some chemical products such as plastics, calcining of limestone and a few other opportunities. We are always hopeful that there will
be opportunities for a wallboard plant and we do hear some national company is looking at that potential every couple of years.
MR. EPSTEIN: I have got to say I am profoundly sceptical about that possibility. It is one that has been discussed for years and the amount of progress has been pretty small. I appreciate you giving me a list of some examples where there is at least some value added. I think the hard reality is that for the most part, either because of the nature of the materials, of which gypsum is a good example, or because of the small domestic market that we represent here in Nova Scotia, it does not seem likely that there is a lot of opportunity, I guess, for value added, but at the same time I encourage you to continue looking and exploring for possibilities. I hope you can maybe find some because it means in the end that we are missing out on an opportunity for developing employment and wealth associated with the mineral industry.
I will give you, if I may, a calculation that I have done based on some of your figures which I think illustrate part of the problem. One of your figures is that the value of production in Nova Scotia is about $350 million. That comes from one of your overheads but government revenues are not very high. You indicated that between royalties or royalties that you characterized as taxes, the total revenues to the government are about $2 million. Then if you take your figure of 3,300 employees with an average income of $800 a week and you calculate what the tax revenue is to the government based on that, that is about $13 million. So when you add your $13 million to your $2 million, the government revenue is about $15 million based on $350 million value production. That is 4 per cent or 5 per cent.
MR. SWINDEN: Then you put your sales tax . . .
MR. EPSTEIN: You can add a little bit of sales tax. People take their pay and so on.
MR. SWINDEN: And the company's investment is also getting sales tax.
MR. EPSTEIN: I guess what I would appreciate is if you can generate different figures, I would like to see them sometime.
MR. SWINDEN: I think your figures are probably accurate.
MR. EPSTEIN: Even if they are not 100 per cent accurate as to the exact dollar figure, I think they give you an idea of the scale of magnitude that is involved and that is another way of understanding that what we are really doing here is exporting raw materials, I think, is part of that.
The other thing I wonder, though, is if you have a table of the royalty rates according to the different minerals and also the revenues to the government from each of the different ones for coal, for gypsum, for salt, for barite and so on that you could let us have sometime.
MR. SWINDEN: The royalty rates are by and large in the Act.
MR. EPSTEIN: I know they are specified. What I would like is a table that puts them all together.
MR. SWINDEN: Yes, I think we can do that. The other thing that we can do is we have a publication that came out just last year, or perhaps the year before, on the subject of value added processing in Nova Scotia. It is a promotional booklet that we give to people to show the value added and I would be happy to get you a copy of that too if you would like.
MR. EPSTEIN: That sounds great. I am sure all members of the committee would probably be interested in seeing it.
MR. SWINDEN: I will ensure that you all get one.
MR. EPSTEIN: I have another question. It has to do with aggregates. As the Act is presently written, aggregates really are not part of the definition of mineral, but you spoke of them. It is, obviously, part of the . . .
MR. SWINDEN: It is a geological resource, yes.
MR. EPSTEIN: Yes, okay. What I wondered was whether you have any plans to develop a regulatory regime with respect to aggregates? I notice that Ontario has a separate Act that deals with aggregates. I think it is called the Aggregate Reserves Act in Ontario. One of the notable features of that Act is that it provides a fund based on the payments that come to the government for the extraction of aggregates. It is called the Aggregates Resources Trust. What this fund is partially designed to do is to compensate local municipalities for the extraction. I think that a lot of municipalities in Ontario find this a very attractive feature of life under that regulatory regime. What I wonder is whether there are any plans in Nova Scotia to bring in any kind of regulatory regime with respect to aggregates?
MR. SWINDEN: I will speak to that and then I might ask if Kim, who is an aggregate producer, could speak to that, as well. The problem with the regulatory regime for aggregates in Nova Scotia vis-à-vis Ontario or Newfoundland, where I worked before, where they also have a Quarry Materials Act, is that in Nova Scotia the aggregates are not owned by the Crown; they are owned by the landowners, as is gypsum. Increasing regulation of that resource then impinges upon the rights of the landowners to some extent.
MR. EPSTEIN: Can I just stop you. That is a matter of public policy. That is a choice the government makes. The reason they belong to the landowners is that the government decides they belong to the landowners and that they are going to treat them differently than other underground resources which are deemed by Statute to be owned by the Crown.
MR. SWINDEN: Yes, that is correct. One supposes that if you wanted to change that, there would be an issue of compensation with respect to the resources as well. The reality is that, speaking from a personal point of view, I would like to see some kind of a Quarry Materials Act in Nova Scotia. I am not sure what form that would take. We are not at present engaged in trying to draft one, so I guess I can take care of your comments about the Ontario situation under advisement. That is something we certainly would like to think about, but the easy answer to your question is that we are not devising that sort of regulation at the present, at least.
MR. CONRAD: The Ontario example that you are talking about as a royalty or a percentage was put into place years ago mainly because of environmental concerns of reclamation of the process. Now, here in Nova Scotia, the way you stated it, being a compensation to the municipalities as if it is something wrong and we are paying somebody off in the industry, in Nova Scotia we do something a little different. We have a couple of processes. When you go in to open a quarry, after you finally find the proper material, we will go in. Before you produce you have to bond a minimum of $10,000 per hectare for reclamation. That is closely monitored by the Environment Department because you can get your permit whipped away from you pretty quickly.
MR. EPSTEIN: Reclamation is something of great interest to me and the problem is that the regime for bonding and setting up reclamation only came in, I think, in the 1980's and Nova Scotia is covered with abandoned mine sites, open pit, underground, that are orphan sites, that no one takes responsibility for, for which there is no bonding. I guess what I wonder then is what is the current state of play with respect to all of those abandoned sites? What is the department doing about those? Is there any money anywhere to deal with those? If not, where can money be found?
MR. CONRAD: If we get through the red tape, there have been cases where investors have wanted to reopen mines. I believe, up in Folly, there was a case where a contractor - it had to do with the building of a road - wanted to go in on a site and quarry the site for material for the road. However, there was so darn much red tape that it was really difficult to do because the contractor or the people involved said we will use this site and we will reclaim or put back to a more stable state more of the area than we are actually going to use. We will do this as active goodwill, or whatever. This is one thing that discourages exploration in the province and development of mine sites because there are many areas, like you say, that have been abandoned before any of us really realized the impact. But when you go back onto that site you are expected to take on - if you are only using a certain section of the site you say, no, the way it is perceived by the process - the liability of the whole, complete site and anything that was done for the last hundred years, that can drive people away from investing and trying to do a little bit of the reclamation.
For the most part in Nova Scotia, the underground mines and shafts are gradually being looked after. Scott, or somebody in that area, would be more suitable to answer something like that, I guess.
MR. SWINDEN: I can address that. We have kind of gone into a slightly different area than we started with the issue of abandoned mines and reclamation. This is a tremendous problem, not just in Nova Scotia but in all Canada and in all North America. It is not a problem easily addressed, given the level of resources available. We have been doing a couple of things. One of the things that we do routinely is to encourage companies that have an interest in small surface coal mining operations to take on sites in need of reclamation and to reclaim the sites, take what coal is left, use that to help fund the reclamation, and that has been successful in a number of places in Cape Breton and in Pictou County.
We have an abandoned mines program within my branch and have recently completed the inventory. It is a huge number, it is like 6,000 holes and we have done a priorization exercise, we have done engineering studies, to determine what is the best way to remediate these sites so that they no longer pose an environmental hazard or, indeed, a public safety hazard. We are in the process of doing a specific engineering study for some of the highest priority sites right now and we expect to start work on those this year. The problem, of course, is resources and it will eventually take a significant amount of money if we are to complete this program, but I guess if you don't start somewhere you never go ahead.
MR. EPSTEIN: If the public had to pay for that, how much would it cost?
MR. SWINDEN: Do you have a number for that, John? I don't think so. It would be a lot of money.
MR. CHAIRMAN: Mr. Morse.
MR. DAVID MORSE: Mr. Swinden, you got my brain churning this morning. That was a very interesting point you made about the amount of provincial revenues that would be derived through royalties and income taxes from the employees and presumably a comparable amount from HST, although I guess that is split between the provincial and federal governments from your other operations. So there was approximately $347 million in mining activity last year?
MR. SWINDEN: In 1998, yes.
MR. MORSE: Following through on Mr. Epstein's point, maybe $130 million to $140 million in wages?
MR. SWINDEN: Yes, that is the number, but I didn't do the calculation.
MR. MORSE: No, I am using your numbers. I am taking 3,300 jobs and multiplying it by $40,000 a year to get $132 million.
MR. SWINDEN: I am not sure if all of those jobs are full-year jobs. Once again, I don't generate those numbers, they come from Statistics Canada and may include jobs that weren't a full year. But for the sake of argument we can use that as a ballpark figure.
MR. MORSE: Okay. I am not sure how that compares to other industries but of the $347 million, assuming that wages are $132 million, could you give us the breakdown of the rest of the $347 million?
MR. CHAIRMAN: Could you please speak into the microphone?
MR. MORSE: Yes, sorry. The industry generates $347 million worth of revenues a year in Nova Scotia.
MR. SWINDEN: As I understand it, that number is for mineral sales.
MR. MORSE: Based on the numbers that you have submitted to us, one could estimate $132 million in wages, taking the number of people employed in the mining industry and multiplying it by $40,000 a year, salary, assuming they were all full time, and you have put the caveat on that some may be part time, which is fine. Could you give us some sort of indication as to how that $347 million breaks down, given that we have extracted approximately $132 million in wages? Then at the conclusion of that, I am going to ask you how that matches up against other industries.
MR. SWINDEN: I think the easy answer is that I can't answer that question off the top of my head. I would be guessing. I haven't prepared those figures. There are other things that go into that: there is a capital investment, the actual costs of mining, capital equipment costs of consumables and all the other costs that go into actually running the mine. There are purchases. (Interruption) Energy, absolutely. Terry or Kim, do you have any better sense of how that breaks down?
MR. CONRAD: Well, as in any business, you can take the $300 million, and we can throw numbers around everywhere, but the bottom line is everything else goes out the window but about 3 per cent. We will use 3 per cent as the bottom line in profit for a company, clear of everything else and everything else is expenses. Even in our small operation, just to put it into perspective, we probably do $6 million a year. We ship about 1 million tons of aggregate a year. Just an excavator to load this material is over $1 million, and we try to get a lifespan of eight years out of it, and a loader that you would load a gravel truck with is over $100,000. Just these simple things, doesn't take long to eat it up. There are no buckets of money out there going out of the country, if this is what you are asking; it is all normal business.
MR. MORSE: My point was just to try to get a better feel of what the benefits would be to Nova Scotia, which includes the spin-off. If $150 million of that is used to purchase equipment, which is brought into the province, then that is a significant number. If a lot of the other costs of production are bought from local Nova Scotia businesses, such as power, electricity through Nova Scotia Power, which may generate that from Cape Breton coal, which is also part of your $347 million, then I think those are very significant numbers.
MR. CONRAD: The mineral industry is still a hands-on industry here, although it is highly automated now. The goods and services that are provided, most of the costs are provided to the local economy through the goods and services of companies that are based in Nova Scotia.
MR. MORSE: I am going to give you a couple of questions that I think you will have no problem giving me an answer to.
MR. CHAIRMAN: Mr. Morse, I will have to ask you to keep it brief, as we have other gentlemen who have to go to other functions.
MR. MORSE: I can wait until afterwards.
MR. CHAIRMAN: If you have a quick snapper there, perhaps we could get an equally quick answer.
MR. MORSE: That $347 million includes a lot of coal. What is the closure of Phalen going to do to that number?
MR. SWINDEN: The preliminary figures for this year, given that Phalen produced for part of this year, will probably be close to $300 million.
MR. MORSE: So $47 million lost by the closure of the Phalen Mine?
MR. SWINDEN: Yes. How much more, I don't have preliminary figures beyond that. John?
MR. MORSE: What proportion of the coal does Phalen account for?
MR. CAMPBELL: The production figures for Phalen in 1998 were 1.3 million tons. Prince produces just under 1 million tons. A little more than one-half of CBDC's production will be lost, so that would be about a little less than one-half of the total coal production for the province.
MR. MORSE: Which was 38 per cent of that total number, the $347 million, so we are going to lose about 20 per cent, by the closure of the mine. That's a big chunk of the industry.
MR. CAMPBELL: Unless it is offset somehow by new activity.
MR. CHAIRMAN: Mr. Boudreau.
MR. BRIAN BOUDREAU: Mr. Chairman, first I would like to congratulate the gentlemen for a very fine presentation. I guess down in Cape Breton I would just like to add that the staff down there has a good reputation in the community and they are well-respected. I would like to congratulate them for their efforts down in that end of the woods. I am not familiar with other parts of Nova Scotia to be honest. I can appreciate your comments regarding the industry, particularly when I am living through the demise of the Cape Breton coal industry, particularly Devco. Nobody in the community is very comfortable down there. Your comments, I think, are right on.
My question is about fossils. I didn't hear any discussion on fossils. Although it is not mining, I know of one very successful one down in the Valley, I am not sure whereabouts. There is an organization in Sydney Mines. I imagine somebody in your department is familiar with that particular project. The community is pretty excited about this down there. I guess I would ask where the department stands with this and what they are doing to encourage the development of the project?
MR. SWINDEN: I think the easy answer is four-square behind. We are very interested in this. We actually have a project dedicated to economic development related to fossil resources. The Sydney Mines project, in particular the one that you mentioned, we have a guy named John Calder who is an expert on carboniferous rocks and fossils in Nova Scotia. He has been right in there from the start with them, helping them and encouraging them. He has also been very instrumental in a couple of other fossil initiatives: one is the establishment of the site in Tatamagouche to preserve the fossil forest that was discovered on the beach near Brule. It is a unique site with trackways of amphibians and things. It is quite an amazing site. They have recovered a lot of that from the beach and are setting up an interpretation centre in Tatamagouche.
He has also been very instrumental in the drive to make the Joggins Fossils Cliffs a world heritage site and this, of course, would have economic development for the community associated with it. So I guess the answer to your question is, we think this is a really interesting opportunity. It is a way of looking at geological resources that is perhaps new for miners, but it is an important one. It fits very well with our concern to try to develop better links with Economic Development and the rural development agencies and people to show them how mineral resources and geological resources in their areas can benefit them locally.
I think it is a great idea and I certainly look forward to the one in Sydney Mines opening and being a success.
MR. CHAIRMAN: It is a topic I would be very pleased to discuss with you, I have quite an interest in it. If you want to come over to our side of the House any afternoon, we would be glad to have you. (Interruptions)
Mr. MacDonell and then Mr. Taylor.
MR. JOHN MACDONELL: Thank you for your presentation. With the National Gypsum Mine in Milford, I certainly can't claim all of it for Hants East because when you go through the entrance, you cross the Shubenacadie River and the pit actually belongs in the riding of the honourable member for Colchester-Musquodoboit Valley. But we did try to claim the mastodon that was there, speaking of fossils.
Yet, I have a question around value added, as well. It wasn't clear to me from your previous comments, but I am assuming that the wallboard plant in Cape Breton is not fulfilling all the needs of the province for wallboard, or is it? Do you know?
[9:30 a.m.]
MR. SWINDEN: Johnny, do you know that off the top of your head.
MR. CAMPBELL: The wallboard plant at the Strait produces a different product. I do not know if you have ever seen a sample of it. It is not your traditional wallboard that has paper on both sides with a gypsum product in the middle. It is a matrix of recycled cardboard paper product and gypsum. It is much heavier. Their market is mainly the northeastern United States. Besides the samples I have seen, I have never seen the product available locally. I know they did test market it here. It has appeal to certain trades. It bonds a bit differently and it is a heavier product so I think there may not be the same desire to use it by the tradespeople.
MR. JOHN MACDONELL: I am assuming then that the wallboard we use, which is the traditional wallboard, we import for the most part and so your comments around making the wallboard here and shipping it, whether to Europe or the United States, whatever, I do not understand why there would be a problem in doing that but there is not a problem in bringing it in and, you know, ship the raw material out and bring the wallboard back. Can you explain to me why that is disadvantageous to us to make it here and ship it out but it is an advantage to ship out the raw material and bring the wallboard back?
MR. SWINDEN: I have not made a study of this. I can only speak from what I would expect is going on and that is that I would think that it is a matter of volume. The market in Nova Scotia is very small compared to the market say in New England or the Eastern
Seaboard or in Europe. Economically it makes more sense for the small volumes that we have to take whatever penalties there are in shipping rather than erecting a plant here. I do not know if the economics are there. The economics may not be there for the local market. I can only assume that if the economics are there, some enterprising Nova Scotian would be out there doing it.
MR. JOHN MACDONELL: We like to think that. I am thinking about the site in Milford. As you indicated, it is one of the largest gypsum mines in the country actually, I understand, is that right? Is it the biggest in the country?
MR. SWINDEN: It is the largest in the world, is my understanding.
MR. JOHN MACDONELL: Largest in the world, so I would say that volume would certainly indicate that we have the material.
MR. SWINDEN: Yes.
MR. JOHN MACDONELL: Okay, as far as other value added, we have nobody in this province who is building mining equipment - we are not doing anything of value added in that regard - or is there?
MR. CONRAD: Most of the mining equipment is specialized. There are a lot of options that each mine may add but basically there is no manufacturing of the larger mining equipment here. We are too far down the line right now to develop manufacturing. The Irvings, a number of years ago, tried to build the trucks here and it did not pan out that well. There are lots of repairs on it, however, because it is equipment that is meant to destroy itself and that part stays here.
MR. JOHN MACDONELL: All equipment is like that. What about explosives? We do not manufacture any explosives?
MR. CONRAD: On-site we have prills I do not know, it is part of a manufacturing process. The most that we as an aggregate producer do, is mix the ammonium nitrate with diesel fuel and there are two main companies that supply this product in Nova Scotia right now.
MR. JOHN MACDONELL: I have just a couple more short questions, Mr. Chairman. One is around the titanium, in the Minas Basin, and I see on your map that you are including, I would say, a large section of the Shubenacadie River in that as well. Has there been any discovery of an on-land titanium source or is it all water, marine based?
MR. SWINDEN: It is all just aggregated in the river, the fluvial sands and the sands in the basin. There is no hard rock source.
MR. JOHN MACDONELL: So, from the present discovery or the samples - I know they are doing some core sampling there - what kind of amounts do you need in order to make this a viable operation?
MR. SWINDEN: I don't think that is an easy question to answer, because there are a lot of variables. We could probably work up some idea of what you would want in terms of volume and things, but there are a lot of things that have to be taken into consideration. One is that you have to look at the mineral composition of the titanium sands and what the actual markets are for the minerals that you are getting out of it, and to what extent they would have to be processed in order to meet those markets.
You have a mining problem out there, obviously, and a long environmental road to go down before you get to any point where you might want to consider mining, and the cost of that, and the cost of any steps you would have to take in order to meet the environmental restrictions would certainly be a determinant in what kind of size and grade you would need in order to actually go ahead with it and the cost of shipping, all those kinds of things. This is a very early-days project.
Basically what has happened is that they have discovered that the sands out there are mechanically sorting these heavy minerals into concentrations that look economically attractive, and they are in the process of trying to determine how widespread these things are and to what extent they might be economic. I don't think we are anywhere close yet to doing any kind of economic numbers on it to decide what kind of size and grade we might need or where a mine might be or anything like that. It is too early for that yet.
MR. JOHN MACDONELL: Do they have any idea of the source? There must be a source.
MR. SWINDEN: That is an interesting question. Geologically, as far as I am aware, there isn't any obvious concentrated bedrock source. One supposes that it must have been concentrated fluvially perhaps a couple of times, eroded off of bedrock sources, concentrated a bit, and then those sands then re-eroded and concentrated again, upgraded. The titanium minerals would normally come from the kind of rocks that you find around Voiseys Bay, Gabarus. We don't have any large bedrock sources exposed in Nova Scotia for those right now. It is an interesting question which I am sure some geological researcher will be more than interested to go after eventually.
MR. JOHN MACDONELL: What do you use the titanium for?
MR. SWINDEN: It has a number of uses; the main use of titanium oxide is pigment in paints. It has a number of high-tech industrial uses as well, in steelmaking.
MR. JOHN MACDONELL: I just have a question for Mr. [Michael] MacDonald about the kaolin clay. Mr. MacDonald, I am curious to know if you have any idea of the size of the kaolin deposit in the Shubenacadie area? Has that been researched enough to give you any notion?
MR. MICHAEL MACDONALD: It is very large. I think that the numbers that they are putting forth in terms of tonnages are probably quite preliminary, but I think the most important thing is that they have looked at an area that is a large part of the Musquodoboit Valley. They have done some regional exploration in there using seismic surveys, much like they use in the oil industry, with some regional drilling to confirm what is underneath. They have intersected kaolin throughout a large area. Some of the best material that they encountered was in one area called the Sibley Road area. They focused most of their attention there. There are large tonnages of the kaolin there.
MR. JOHN MACDONELL: I read an article yesterday, I think it is actually in this booklet. You can correct me if I am wrong, but I thought what I read, I think it was in Georgia, that there were deposits and they said three metres thick, and they have an industry, I am assuming, based on that, but yet here in Musquodoboit, I think it was somewhere in the range of 200 metres thick, at least what they found so far or at least some deposits of it were 200 metres. I couldn't believe those two numbers. Did I read that right, three metres compared to 200 metres?
MR. MICHAEL MACDONALD: The actual deposits are up to 200 metres thick, but they are not all kaolin clay. There is actually several layers of kaolin and interbedded between there is silica sand. So you have sort of a stacking of clay and sand and clay and sand throughout those areas. I think the interesting point is that they occur, in some areas of that basin, very close to the surface. They have actually been able to uncover some using backhoes. The industry in Georgia is very well established, it has been going for a very long time, and most of their deposits are quite deep. They end up having to remove a lot of material to get to their two metre or whatever beds that they extract the kaolin from. Our deposits, some of them are quite shallow and then there are deeper ones as well.
MR. JOHN MACDONELL: I just want to tell the members who are presenting that in a few minutes I have to leave, I don't want you to think that it has anything to do with your presentation. I have enjoyed it, but I have another commitment. Thank you very much.
MR. CHAIRMAN: I hope that one day Stora will be using Nova Scotia kaolin rather than shipping it in from the United States. Mr. Taylor.
MR. TAYLOR: Mr. Chairman, I find the whole question of the value-added feasibility of gypsum, i.e. wallboard very mind-boggling and perplexing. I will tell you why, in the early 1980's and right into the mid-1980's, I used to, along with several other Nova Scotian truckers, transport gypsum wallboard, from Lundrigan's, Atlantic Gypsum, in Cornerbrook,
to Nova Scotia and New Brunswick building and supply outlets, McCulloch Build-All, I guess they were in business, Kent Building Supplies, Lockharts, Halliday's, the whole gamut. Most of the wallboard at that time, I was told, going to Nova Scotia and New Brunswick communities was coming out of Cornerbrook, Newfoundland.
At that time, and I think this holds true today, the price of diesel fuel, your operation, maintenance, wages, your ferry and everything was certainly quite large. I could never figure it out, and then as time went by and so on, the orders ceased and hardly a load of Newfoundland gypsum would come to the mainland, as they call it. From talking to the different retailers and so on, they told us that they could bring in wallboard from Texas cheaper than you could transport it across the Gulf. It certainly impacted the transportation industry.
The infrastructure comments you made, I thought, with all respect, Mr. Swinden, you were quite generous with your adjectives when you described our infrastructure here in Nova Scotia. Hindsight is always 20/20. If we only had had the foresight to leave some of our rail lines in place that we tore up, and I am certainly a supporter of the trucking industry, but our highways are becoming over-indulged, if you will, and we have so many transportation rigs on the road today. When you get off our 100-Series Highway and into the 200- and 300-series and the gravel road, like Murchyville, I think of Tusket Mining trying to develop that gypsum mine out there. The average age of our bridges in Nova Scotia is about 60 years ago. A b-train configuration which can go up and down most of our 100-Series Highway can't access these large mineral deposits and mining developments.
I guess, I think the mining industry has many challenges, like your Aboriginal title, and the fact that most of it is owned by private landowners and things of that nature. Of course you are much more knowledgeable than I am on this as far as the infrastructure, the transportation, I know infrastructure takes many forms, but as far as the highways in this province, I think that they have deteriorated to the state that on many of our roads, they are actually a disgrace. I guess I throw that out more as a comment than a question.
MR. SWINDEN: Okay, I don't disagree with anything you say. My comments about infrastructure were not meant to be a comment on any particular infrastructure element in Nova Scotia. It was more a comparative comment; Nova Scotia compared to northern Ontario or northern Saskatchewan, where there are few if any roads and services. That was really the thrust of that comment, not meant to be a particular comment about any element of our own infrastructure.
MR. CHAIRMAN: Mr. Chipman.
MR. FRANK CHIPMAN: I just had a question about cobblestone. I think I know what it is. I know this year you are doing Parkdale . . .
MR. SWINDEN: Cobblestone is . . .
MR. CHIPMAN: Interlocking brick?
MR. SWINDEN: Not necessarily interlocking, but cobblestone is for walkways, driveways.
MR. CHIPMAN: What constitutes a deposit of kaolin? How large a deposit would you have to have to make it economically feasible because I know in my area, kaolin was discovered there years ago.
MR. SWINDEN: As with the question about titanium, there is not a straightforward answer to that. There are various parameters that are necessary depending on the market. It depends on how white it is, how bright it is, what its chemical composition is, how close to surface the deposit it, how much stuff you have to move in order to get to it, where it is in relation to roads and other infrastructure and things like that. So there isn't sort of one easy answer to that question. The pits in Georgia, as I understand - Mike you can correct me if I am wrong - are mining deposits that are hundreds of thousands of tons rather than millions of tons. They are relatively small.
The character of the kaolin changes laterally along the strike, like this, so what you are looking for is a pocket that has all the things that you need, the right brightness, the right whiteness, purity, all the rest of it and it may be at this level or it may just be a spot here. As you go out laterally from it, it will deteriorate and no longer be of suitable quality. So I guess the answer to your question is that probably with high quality, close to surface, with hundreds of thousands of tons, you might be in a position to recover that.
Grain size is another important characteristic. Different markets require different grain sizes of the kaolin crystals and that mix has to be fairly closely monitored. Often what you have to do is get two or three deposits of different characters and blend them for the market that you need. It is not a perfectly straightforward answer. I am not trying to dance around your question, but it really isn't something that can be answered with a single answer.
MR. BOUDREAU: Mr. Chairman, I will be very brief. I really only have a comment. Personally I am very impressed with the presentation here this morning, particularly with the written recommendations or suggestions, I should add, that the staff of this department put together. There are some suggestions such as, staff of Natural Resources should meet with the Finance Department and the Economic Development Department on a regular basis.
I guess my comment is just to encourage the government members here to perhaps bring forth these initiatives and ensure that the department gets its fair share of attention, I guess, as we head into the direction that the government is going and in, particular, rural Nova Scotia, it is interesting to note that most of these developments are in rural Nova
Scotia. History shows that they have worked. I guess I just want to encourage the government members and perhaps yourself, Mr. Chairman, as the direct link to the Cabinet, to bring these suggestions forward and ensure that these gentlemen really get some of the attention to have the opportunity to have a positive input into the new economic prosperity that this government is going to lead the province into.
MR. CHAIRMAN: Now there was one question over here. Yes, Mr. Morse, a quick question, I would hope.
MR. MORSE: Like the member for Hants East, I should apologize because I do have to go in a moment and I could tie you gentlemen up for quite some time asking you a lot of questions. I ask these questions because by scratching and probing you help me understand more of the message that you bring.
You made a very interesting comment, Mr. Daniels, about the importance of getting our fiscal house in order, provincially. Of course provincially, the two main services that we bring to the public are public health and education, which I presume is also important to your industry, that that be in place. I guess I would just like you to expand on why you are so interested in having the province's fiscal house in order from the point of view of investing more in the province? Would you expand on that one?
MR. DANIELS: Sure, to begin with, there can be no hope of reduction in taxes, for example, to either corporations or individuals until such time as we deal with this problem. I would like to sit here and ask you, for example, to expand Dr. Swinden's geology department, to put more men in the field. It would not be responsible for me to do that and I cannot do that until you get the affairs of the House in order.
The transportation network and the infrastructure have been alluded to in the province. I guess in my presentation I mentioned it as a positive thing but I rightly did not comment on its condition, the fact that it is there, the observation that it needs upgrading is absolutely correct. The roads, bridges and so on, these problems cannot be tackled until you deal with this other overlying problem. So from my perspective I see all these critical areas lined up and on hold until you can deal with that. I think, of course, the same thing would hold in health, in education and everywhere else. You cannot move forward in any of these areas until you deal with the debt, deficit, sorry. Debts are something else. Anything you want to add to that, Kim?
MR. CONRAD: I think what we are here for today is to educate you people. With the Department of Natural Resources, Dr. Swinden, Mike and John, they have so much resources. Every time you go over there you can get new information. The resources are there and I would just ask that you take the time before you make political decisions, which have been made over the years by whoever, and many people, you have the resources, make use
of them. We have paid for them as taxpayers. These people have put blood, sweat and tears into developing a program that is easy to understand; just use those.
Everything today, getting the deficit and the debt under control, is cut, cut, cut. We know we need education. In the mining industry it is very important too that we have a full range of mining engineers coming out of TUNS that are employed. We need to develop or refine the health system. However, you can only cut so far and with the mining industry, or the mineral industry in Nova Scotia, instead of just leaving us sit here, maybe the scales can come from red to black more easily if we promote profit in the mining industry and try to find a way to work together instead of being at loggerheads, especially with environment. We need to be helped in this industry to overcome hurdles or find a way around them that will satisfy everybody instead of putting up hurdles.
When we can make profit, the province will be making profit. You can go from a loss to a profit as quickly as you can go from a profit to a loss. We just want to explain our situation in helping overcome any deficiencies financially in this province. I think we have more potential to help this province, which is us, than to do harm to it.
MR. CHAIRMAN: Mr. Epstein, you have a very quick question.
MR. EPSTEIN: I wonder, Mr. Swinden, if you can bring us up to date with respect to the Rio Algom tin mine and what is going on with respect to its site reclamation. In particular what I wondered is whether the bonding that was put in place in the end is proving an adequate amount to cover the job that is necessary to do?
MR. SWINDEN: Rio Algom is in the process of investing $20 million in the Rio Algom site. I have seen a number of presentations on it. They are proceeding very well. Our belief is that when they are finished there, it will be a textbook reclamation that we will all be very proud of. I have no concerns whatsoever at the present time. They are doing exactly what they should be doing and they are doing it very well. In the process of doing that, they are contributing economically to the community around. I mean in the process of spending that $20 million, there are local services and local things being bought and, of course, this is another aspect of the mining cycle, that there is economic activity at all areas of the mining cycle and this is an illustration of that, at the reclamation end.
MR. EPSTEIN: So the bonding program is something you continue to endorse?
MR. SWINDEN: Absolutely, and we do, we look at every proposal for mineral development and bond it.
MR. CHAIRMAN: Thank you, Mr. Swinden. On behalf of the committee, I certainly want to thank, in particular, my colleagues, Mr. [Michael] MacDonald, Mr. Campbell and Mr. Swinden from my former career in government, and also Mr. Daniels, Mr. Conrad and Mr.
O'Sullivan from the industry and the chamber. Since Mr. O'Sullivan has not had an opportunity to address the group, I was just wondering if you would like to leave us with perhaps a word or two of wisdom.
MR. CONRAD: I would like to just say that John is the prospector among us. There is nobody around who has more hands-on experience with exploration than John does.
MR. CHAIRMAN: Thank you, Mr. Conrad. John.
MR. JOHN O'SULLIVAN: I would just like to say a little word from the prospector's point of view. I have been living in Nova Scotia for 20 years. I have been in the business for 40 years. I have worked everywhere - from Australia, Chile, Europe and most of North America. I have settled in Nova Scotia because I figure it is a lovely place to live and I think the quality of life here is better than I have come across anywhere else. A lot of my work has taken me away from here to work and since 1991 I probably have not had more than six months income from Nova Scotia. Over the last two years, I have probably had about a total of three months income.
But anyway, having said that, I think Nova Scotia has a tremendous mineral potential. It is something that needs a lot of encouragement. Over the past few years there has been a lot of negative vibes sent from the Nova Scotia Government in terms of welcoming mineral companies here to the extent that we do not have Noranda, or Falconbridge. Falconbridge still has some claims here but they have not worked them since 1991. We do not have Cominco. Most of the major companies are not here, but I have a feeling with an increasing zinc price and the potential for zinc in Nova Scotia, you are going to see some come back.
Mining companies typically do not want handouts. What they want is an environment where they can operate efficiently and if you give them the environment, they will come in and spend their money on things. Most of the junior companies that I have had my support from over the last number of years have more or less evaporated because of low metal costs and just a general downturn in the economy and most of these companies have either gone out of business or are just on hold. We have a Prospectors Assistance Program here in Nova Scotia that is doing a tremendous amount to keep the prospector going down through these bad days.
MR. CHAIRMAN: Yes, it is.
MR. O'SULLIVAN: We have a Prospectors Association that I think is 120 members now and most of these are weekend prospectors who are going out and actually staking claims. A number of them have come up from the weekend prospector level to the professional level. They are staking good claims. There are gold showings coming up and when things swing back, these people will be ready to peddle their properties.
There is great credit due to the department for the work they are doing on that prospectors' assistance. There is about $5,000 assistance available to individual prospectors and this covers mostly operating costs, assays, vehicle costs and so on like that. I know that most of these prospectors who are getting the grant are probably putting in the equivalent of two to three times their own money into this venture. It is probably one of the best investments in terms of mining at the present time that is going on in the province.
MR. CHAIRMAN: Thank you very much for those words, Mr. O'Sullivan. Hopefully, we can have you back and perhaps dedicate a session to the prospectors. It is something that I worked very closely with, the prospectors, in the years gone by in the province and I agree that the program is very good in this province to encourage exploration.
I want to thank all of you gentlemen. I was delighted to have you here, I have to say. The other members of my committee will agree that we had a very meaningful exchange of information and ideas. I will repeat Mr. Swinden's words that the review of activity is something that every member from this committee should attend and take some colleagues from the Legislature, too. How many has this been? What year is this, about the . . .
MR. MICHAEL MACDONALD: The 23rd.
MR. CHAIRMAN: . . . the 23rd that I have attended. I will attend this one on the 8th. I missed one because of a snowstorm. The members in Halifax didn't believe there was a snowstorm, but there certainly was one in Pictou County and we couldn't get out of there. That was many years ago. Gentlemen, thank you very much for your time.
[The meeting adjourned at 10:01 a.m.]