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MAC warns Quebec government against new royalty regime
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25th March 2013
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TORONTO ( – The Mining Association of Canada (MAC) on Monday warned that a new royalty regime would worsen Quebec’s investment appeal with detrimental economic effects to the province and Canada's economy as a whole.

The Quebec government was this week preparing to table a new mining tax regime that would significantly increase mining taxes and royalties.

MAC said it expected that the new proposed tax regime would put in place two new levies - a 5% tax on the gross value of yearly production, as well as a 30% royalty on 'super profits'.

The association pointed out Quebec was already a high-tax jurisdiction in many respects, and as recently as 2010, saw the former government raise the taxes on profits to 16% from 12%.

The province’s mining industry was already facing a precarious future as diversified miner Cliffs Natural Resources recently said it would idle its Wabush Pointe Noire plant by the end of the second quarter, to reduce costs as iron-ore prices remained weak, and the Canadian National Railway in February shelved a feasibility study for the construction of a proposed C$5-billion rail line and terminal handling facility to serve the Quebec/Labrador iron-ore range, owing to current market realities forcing project developers to defer expected project start-ups.

"The new regime would tarnish Quebec's reputation as a mining-friendly jurisdiction for investment. Moreover, from a global mining company standpoint looking to build its next project, I am concerned that there will be little distinction between Quebec and the rest of Canada, thus harming the country's reputation as a whole,” MAC president and CEO Pierre Gratton said.

Competition for mining investment was fierce on a global scale. Canada competed against other global mining countries that were equally touted for having rich mineral deposits, such as countries in Europe, Latin America and Africa.

The MAC said with so many other countries at play, a mining company would simply overlook Canada for another mining jurisdiction considered more competitive from an investment standpoint. The ramifications would be vast, translating into a significant loss of royalties to the government, well-paying jobs for Canadians and the significant spin-off business opportunities that a mine gives to an entire community.

"This government's approach reveals a limited knowledge of the sector and the global reality in which it operates today. The actions of this government go against decades of sound economic policies advanced by Quebec governments of all political stripes, including the Parti Quebecois," he said.

The Association minière du Quebec (AMQ) had been vocal within the province to sound the alarm of the negative consequences that would ensue if the new royalty regime, as proposed, took hold.

According to the AMQ, the current level of taxation stemming from mining activity already provided significant economic benefits to the majority of Quebec residents.

"The hikes are positioned as just penalising the mining industry, whereas in reality, they put into peril the livelihoods of thousands of families in the province who rely on the industry for employment – both direct and indirect jobs. The fact is, companies will simply find somewhere else to mine," AMQ president Josée Méthot said.

Edited by: Creamer Media Reporter


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