Hike in mining royalties won't affect competitiveness, Quebec minister says

Quebec's natural resources minister said the government will proceed with raising mining royalties this spring, conceding it was impossible to reach a consensus at a mining forum on the thorny issue.

"When it comes to increasing royalties... we aren't waiting for a consensus," Martine Ouellet said at a news conference.

The minister says the reform won't hamper Quebec's global competitiveness.

The forum attracted mining companies, unions, citizens groups, aboriginals and environmentalists which held irreconcilable visions.

The industry argued that higher royalties would be the death knell for some mining projects and would result in job losses in remote regions of the province. Other participants said companies are able to pay more to the government in order to extract non-renewable resources.

Artist and environmental activist Dominic Champagne demanded a study on the social and environmental impacts of the mining industry in Quebec. Ouellet backed the idea without giving a precise timetable for its implementation.

Earlier, she told the forum that the Parti Qubcois government wants to increase royalties "particularly where returns are truly exceptional" to ensure there is "always compensation to be paid to extract a resource that belongs to all Quebecers."

In response to the industry's claim that it needs a "stable and predictable" royalty regime, the minister said that local communities should also benefit from stability and predictability.

Ouellet noted that metal prices have increased five-fold on average over the last decade.

A Quebec Chamber of Commerce representative responded that Quebec mining royalties are now 32 times higher than they were 10 years ago.

The government wants to introduce a hybrid system that would not only tax mining profits but also impose a tax floor equivalent to five per cent of the value of the ore.

Criteria that will guide the implementation of the new system are stability, fairness, transparency, efficiency and competitiveness, said Ouellet.

University of Montreal professor Normand Mousseau, who wrote the book "The Challenge of the Mineral Resources," said the importance of the mining industry in the Quebec economy has declined since the 1960s, mainly due to the growth of other sectors. He added that mines create proportionally fewer jobs than other industries.

Jose Methot, CEO of the Quebec Mining Association, said Quebec deposits are generally less dense than in other mining centres around the world and operating costs are higher mainly because they are remote.

She said Quebec cannot dictate the rules of the global mining industry.

Mining companies currently require a rate of return between 15 and 20 per cent for their projects, noted Renault-Francois Lortie, a partner at KPMG-Secor. He said such opportunities are rare in Quebec and would become more so if a tax is applied on the extracted value of the ore.

Nochane Rousseau of the accounting firm PricewaterhouseCoopers said that such a tax would discourage long-term operation of mines in Quebec, since they have an interest in extracting only the best sourced ore.