In recent reports, the Mining Association of British Columbia (MABC) correctly points out that investment in mineral exploration is down in BC. Like other sectors in BC, the mining industry is looking to the new government to help reverse its fortunes. The MABC hopes that Gordon Campbell can overcome the "political and regulatory uncertainty, poor policy decisions... especially policies affecting access to land" that the industry claims are key factors in keeping investors away.
But how much of this investment downturn is unique to BC? Statistics from federal and provincial governments show that the malaise extends well beyond here. According to Natural Resources Canada, all provincial jurisdictions that have a natural endowment of metals experienced lower exploration investment in 2000 relative to 1998. Ontario was down 11.5%, NWT was down 23.3%, BC was down 23.1% and Quebec was down 39.3%.
While there have been recent small upswings in 2000 in Ontario and NWT, this largely reflects the on-going diamond fever in the NWT and, in northern Ontario's Canadian Shield, a response to the rise of platinum and palladium prices. It is true that exploration activity in BC does not rank as high as these jurisdictions in 2001, but this should come as no surprise. The mineralized regions of BC have, by comparison, been well picked-over. This is not to say that there are no discoveries yet to be made and much more exploration needing to be done in BC. At this point in its history, however, it is not realistic to expect BC to match some of these other regions.
It is important to note that these other provinces and territories also experience extreme fluctuations in investment, from peaks in the early and mid-nineties to plunging lows in-between. These cycles are a fact of life in the high-risk mining industry--affected by factors such as commodity prices, the relative merits of other investments (such as high-tech), and general investor confidence in a sector that gets occasionally shaken by scams like Bre-X.
Furthermore, Canada is not alone in its slumping exploration activity. The Metals Economic Group, as quoted in the Mining Journal, reports that worldwide exploration expenditures fell 31% in 1998, and a further 23% in 1999. During this same period, exploration spending fell 29% in Latin America, 50% in Africa, and 60% in Pacifica/Southeast Asia.
So the MABC can blame BC policy all they want, but it seems the troubles are not necessarily all of our making. We could emulate Africa and still register a drop in exploration investment. The incoming Liberal government should note that there is a real danger in scapegoating BC regulations when the root problems are much broader. Not only would this waste valuable time, effort and political capital in non-solutions, but it risks creating new problems and political conflicts that would give nervous and doubtful investors something to really worry about.
The suggestion that we need to overhaul and streamline BC's environmental regulations and land-use system in order to attract investors does not hold true in this broader context. Such moves will have no influence on international commodity prices or global investment cycles, but could increase uncertainty and conflict among stakeholders, and may expose BC taxpayers to increased liability, as has been seen in other poorly regulated jurisdictions.
For example, the Fraser Institute recently argued that BC should be looking to jurisdictions such as Nevada as a model of a competitive regulatory framework. But we should be wary of the long-term costs of such an approach.
In Nevada, taxpayers are facing a significant liability for mines left unreclaimed. States like Nevada have tried to attract investment by shifting the economic burden from mining corporations to the public at-large, leaving behind environmental disasters for the public to clean up. Over the past several years, the number of bankrupt or abandoned mines has increased significantly throughout the Western US, with state and/or federal agencies potentially responsible for at least a portion of the clean-up costs of 13 mines in Nevada alone. The price tag for the clean-up in Nevada ranges from $100 - $480 million US. Is this really the kind of regulatory regime we want for BC?
Let's not try to compete with jurisdictions like Nevada (not to mention Latin America), where they continue to create serious long-term costs for health and the environment. Rather, we should seek to develop a reputation for world-class environmental practices, accountability to communities, and cooperative relations with First Nations. That would be the mark of a truly modern mining industry.