This article was provided by the Ontario Mining Association (OMA), an organization that was established in 1920 to represent the mining industry of the province.
With reduced mineral demand and commodity prices at the forefront of business news, the Ontario budget to be tabled next Thursday will want to look at the competitiveness of Ontario’s mining industry. Temporary dips in prices are an expected part of the cyclical nature of mining. However, policy and program stability and continuity from the provincial government can go a long way to ensuring the industry continues to thrive.
Government support for mining in this way seems to be working. The province continues to attract the largest share of mineral exploration investment dollars in Canada, employment is rising and new projects are under development. Yet, it cannot be stated often enough that the prices for Ontario’s mineral commodities are set in international markets. Miners are price takers. They cannot raise the prices of the goods they sell, so they must put a lot of energy into cost control.
A tremendous amount of upfront capital and long-term planning are required in mine expansions and new development. These decisions require confidence that the government places a priority on mining and that governmental actions will be consistent. Now is the time for the government to stay the course with regards to cost pressures affecting the mining sector.
The Ontario Mining Tax is a profit-based royalty paid by mineral producers. The mining tax is applied in addition to all corporate taxes, payroll taxes, sales taxes, permitting fees and other business taxes. In 2011, revenues to the three levels of government from the mining industry in Ontario exceeded $1 billion.
These figures do not include income and payroll taxes paid by mining employees, which would conservatively amount to more than a half-billion dollars annually. These revenues go toward supporting health care, education, transportation and other public priorities. Mining not only provides the materials needed to construct infrastructure and technology, it pays for them too.
Tax contributions by the Ontario mining sector generally amount to approximately 3.4% of total Ontario business tax revenues, which is almost double the industry’s GDP share of about 1.8%. Also, jurisdictions with higher mining tax rates generally have lower hydro costs and the governments cost share on infrastructure. In Ontario, we pay one of the highest rates in North America for electricity, and mining companies cost share capital for necessary infrastructure.
As Ontario Finance Minister Charles Sousa wrestles with the province’s strapped financial situation, he knows mining is a pillar of strength in the mix of the economy. “Since 2002, the overall international goods trade deficit for the province has more than quadrupled,” according to “Mining: Dynamic and Dependable for Ontario’s Future,” which was written by University of Toronto economists Peter Dungan and Steve Murphy. “The trade surplus for Ontario mineral products has strengthened to more than $12 billion, remaining positive over the entire period.”
“The Ontario economy continues its slow recovery from the biggest world economic downturn since the Great Depression,” said the economic study noted above. “Ontario’s manufacturing sector is struggling to regain lost ground, beset by a strong Canadian dollar and weak recovery in the United States. But with the natural resource commodities that the world wants and if it maintains an atmosphere conducive to investment, Ontario will continue to be pulled ahead by a strong mineral industry.”
The mining industry in Ontario remains optimistic that the contents of the next Ontario budget will be supportive of this valuable sector contributing to the economy and society of Ontario and not impair its competitiveness in the global marketplace. Mining remains well positioned to partner with the Ontario government in its efforts to create jobs, grow the economy and increase government revenues. So far, Ontario Premier Kathleen Wynne is taking the advice of Northerners and staying the course on mining tax in order to help grow the economy.
Earlier this week, OMA President Chris Hodgson sent a letter to the editor of The Toronto Star in response to an article on the Ontario Mining Tax.