[Plan Nord] Québec’s Incentive – by Brian Burton (Lexpert Special Edition – Mining – March 2016)

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Québec is investing in mining infrastructure as part of its “Plan Nord” but the payoff is not immediate

Québec’s Plan Nord reads a lot like the recipe for stone soup. Like the hungry travellers of legend, who offer up a “magic” stone to cajole villagers into providing the ingredients for a community meal, Premier Philippe Couillard has tossed iron ore, assorted other minerals and $2.7 billion worth of infrastructure funding into the pot. Now he’s waiting to see whether the private sector will thicken the broth with mining and energy projects worth $50 billion.

If it works, Plan Nord will deliver electricity, roads, rail lines, ports, airports, schools, hospitals and thousands of mining jobs to the vast area north of Québec’s 49th parallel, while generating billions in royalties and taxes for government coffers. The 20-year plan covers a sparsely developed area of 1.2 million square kilometres, twice the size of France, that’s laden with iron, gold, diamonds, copper, nickel, zinc, uranium and rare earth minerals.

In Couillard’s favour, lower energy prices and a weaker Canadian dollar help to reduce project costs, and Northern Québec also contains enormous hydro-electric potential. Importantly, the monopoly provincial electric utility, Hydro Québec, is owned by the provincial government. Plan Nord calls on Hydro to build some $20-billion worth of new hydroelectric-generating capacity, assuming it’s supported by off-take agreements from new mining projects. Controlling the power company, arguably, could make it easier for the province to jump-start development. Moreover, the audacious Plan Nord is seen by some as the legitimate successor to Hydro in the role of standard-bearer for Québec pride.

Arrayed against the plan are stubbornly low commodity prices, the remote nature of the region, the dearth of rail lines, roads and ports – which imposes formidable transportation costs on both development and operations – and the lack of electric power infrastructure that further elevates cost profiles.

“The government cannot respond to the shortfalls of the public markets,” Jean Gagné of Fasken Martineau DuMoulin LLP says of commodity prices. But while they wait on prices, he says, industry and government can make modest infrastructure investments that will help reduce production costs.

Couillard and his ministers have been clear that, like stone soup, Plan Nord will require broad participation, especially from private-sector project proponents. But, like stone soup, someone has to toss in the crucial first ingredients in the bowl.

“We cannot wait until there is a mining boom and everything becomes uncontrollable,” Energy and Natural Resources Minister Pierre Arcand told the CBC. Arcand has said Québec will spend $1.3 billion on infrastructure and job training in the first five years (2015/20) of Plan Nord to assist the private sector in making commitments.

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