Ontario will have to confront a decline in the mining industry over the next five to 10 years. Major mining operations, such as Kidd Creek in Timmins, will close in five years’ time and there are no major operations of this scale in development, or new deposits of this scale being drilled off.
Moreover, the Prospectors and Developers Association of Canada (PDAC) has documented a large decrease in prospecting activity in the province. An operation of the scale of Kidd Creek takes about 10 years to bring into steady-state production — so if we started building one tomorrow, there would still be a production gap of at least five years.
In Ontario we have the largest, most comprehensive and most coherent mining service and supply sector anywhere in the world. This sector of the industry provides three to four jobs for every direct job in active mining operations, but as the total amount of mining production in Ontario decreases, the service and supply sector must contract also. It is easy to say that since demand for metals is down, we shouldn’t worry — just wait for the upturn in the global economy and we will ride the wave to renewed success. This is very unlikely to happen — the erosion of capacity in Ontario will make it all the more difficult for us to recover. We have serious competitors in every mining jurisdiction in the world that would like to capture a larger market share from us.
Another common view is that the ore deposits cannot be moved, so mining companies have to come here to do the mining. But mines require capital — a lot of capital — and although the mineral deposits cannot be relocated, the capital that drives them into production can and will move to wherever in the world it will provide a better return on investment. If the mines in Ontario cannot compete, the capital will move to other countries in the world and our mineral deposits will stay in the ground.
Some would say that the problems are because many of the larger mining companies are foreign-owned; this is not true — every mining company must employ its capital effectively, Canadian or not. Others will complain that Canadian mining companies must compete against mines in countries where the regulations on health and safety and environmental protection are much more lenient. But the countries where this is true are also the countries that are spending many millions of dollars to improve — and they are catching up fast.
In the mid-1980s, as there was growing attention to health and safety, the concern was that, for mines that were already struggling to operate at around 1.5-2 kilometres below surface, the increase in cost for safety would put them out of business. What we discovered was that safer operations were more disciplined and more productive, better able to operate well below 2 kilometres. Safe mines are good for business. We will eventually discover that the same is true for environmental sustainability; the discipline necessary to prevent environmental incidents will prove to be good business.
The fundamental issue is mine productivity. The last major innovation that dramatically increased productivity was in the early 1980s with the introduction of open-stoping mining methods and the equipment that made it much safer and dramatically reduced operating costs. Since then, mines have become deeper, hotter, geotechnically more challenging and logistically more difficult — all of which have eroded productivity. Ontario needs to find new orebodies. We need to mine them more effectively and safely, and we need to have less impact on the environment.
CEMI, the Centre for Excellence in Mining Innovation, believes the best solution is collaborative support for innovation. With most of the major Canadian mining companies retreating from research and development, it is left to the small and medium enterprises (SMEs) in the mine service and supply sector to make progress. But they need government support to deliver the innovations that are necessary to improve mine productivity. The answers are not easy and are not quick — but they are essential.
The global, long-term demand for metals is strong, but mining in Ontario is confronting a decline that was over 20 years in the making — the recent global crisis is simply the last straw. Ontario’s mining industry cannot wait for a global economic recovery to help — but we can make sure it will be better prepared to benefit from the recovery when it comes. The how, the why, and the priority of innovations we need to secure the future will be addressed in future articles.