2019 la ronge core days tailwinds & headwinds of · 2016 survey of 1000 sk residents says: •...
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2019 La Ronge CORE DAYS
Tailwinds & Headwinds of
Saskatchewan’s Mining IndustryWhy backyard issues matter
Pam Schwann, P. Geo,
SMA President
September 26, 2019
SASKATCHEWAN MINING ASSOCIATION
• Voice of the Saskatchewan mining industry.
• Mission: Advance a safe, sustainable and globally competitive mining industry in Saskatchewan that benefits all residents of the province
• Over 45 Member companies including
producers and exploration companies:
o Nutrien, Mosaic, Cameco, Orano, Westmoreland Coal, SSR Mining, HudBayMinerals, BHP Billiton, K+S Potash Canada Inc., Denison, Rio Tinto, Star Diamonds, NSC Minerals, NexGen Energy, Fission, and dozens of exploration and mining contractor companies.
• Roles: Advocacy & Outreach Government; Public (Education); Member
CANADIAN MINERAL PRODUCTION (2018)
Ontario ($10.06 B), QB ($9.99 B), BC ($9.66B) and SK ($6.7 B) top 4 mineral
producing jurisdictions (77.5% value of Canadian mineral production)
CANADIAN MINERAL PRODUCTION
Canada’s Top Minerals
Value ($B)2018($47B)
Value ($B)2017($45B)
Gold 9.6 8.8
Coal 6.4 6.2
Potash 5.7 4.8
Iron Ore 4.8 3.8
Copper 4.5 4.7
Nickel 3.0 2.8
Diamonds 2.7 2.7
Uranium .66 1.4
•Total value of mineral production in Canada in 2018 increased to $47B
•Gold #1 MVP commodity by value of production ($9.6B); potash #3 @ $5.7B
•SK continues to be Canadian jurisdiction to be world leading producer in 2 commodities – potash and uranium (both identified as “critical minerals”
SASKATCHEWAN - CANADIAN &
GLOBAL LEADER IN MINING - 2018
#1Canadian Mineral
Investment Attraction
#3 Global
#1 Potash
Producer
Global
(32%)
#2 Uranium Producer
Global
(13%)
#4
Value of Mineral Product $6.7B
(ON, QB, BC )
#1 Industrial Employer
of Indigenous
people
#4
Canadian Expln $247 (ON, QB,
BC)
LeadingClient of Rail and Vessel Transport (Value & Volume)
SK MINING BY THE NUMBERS
Direct Employment & Payroll
SK MINING BY THE NUMBERS
Employment
= > 30,000
employees
SK MINING BY THE NUMBERS
Business Support – SK Procurement
S
= $5 B
Total
SK MINING BY THE NUMBERS Indigenous Engagement
>2600
SK MINING BY THE NUMBERS
Supporting local Communities
Sample:STARSSaskatchewan Children’s Hospital &
local hospitalsEvent Complex – Mosaic Place;
WanuskewinBreakfast Clubs & Food BanksHabitat for HumanityChildren’s Wish FoundationStep Up for Mental HealthSix Rivers FundScholarships and Northern Bursaries
SK MINING BY THE NUMBERS Revenues to Governments (annual)
$1.8BHospitals - SK Children’s hospital (~$200M) Education – $95 M to replace 9 schools in Regina, Moose Jaw, Stoon, Rosthern, WeyburnHighways - $208M for highway safety infrastructurePublic Safety $100M – crime prevention and wildfire prevention
STATE OF SK MINING• Between 2008 – 2015 >$25 B capital expansions invested in brownfield & greenfield mines
• 3 new potash headframes (Mosaic K3, PotashCorp Scissors Ck, BHP Jansen)
• 1 new solution potash mine (K+S Potash Legacy);
• 1 Pilot potash plant - Western Potash Milestone Project
• Annual record-breaking gold production at SSR Seabee Mine (>95,000 oz)
• Star Diamond – Rio Tinto FalCon JV
• 1 new uranium mine (Cigar Lake) and 1 refurbished mill (McClean)
• Uranium Project Developments – e.g. Arrow, PLS, Phoenix BUT
• Long term suspension of operations Rabbit Lake and more recently McArthur River - Key Lake (Jan 2018
– indeterminant suspension)
• Coal mining phase-out y 2030 if no CCS
• > 500 temp layoff’s at various potash mines (Nutrien & Mosaic)
• >$200 M/yr Exploration Investment
GLOBAL POTASH & URANIUM OUTLOOK
REALITY CHECK – COMMODITY PRICES• Reduced growth in global markets
• Undisciplined production – high inventories
• Overall declining commodity prices
• 2016 -18
•cost control measures
• reductions/suspensions in operations
• maximize production at lowest cost/Tier 1 assets
•Cancellation of contracts (TEPCO)
• “Merger of equals” – PotashCorp + Agrium = Nutrien Ltd.
•Commodity Price (Takers)
•U3O8 - rebound to $25.30 (Aug/19);
•KCl – inventory drawdown; >fert intensive crop; upward price $US265.50
Potash
$138/lb
$US265.50 MT
$US25.30/lb
Challenges to Global CompetitivenessRecent/New Federal Costs• Carbon Tax
• Clean Fuel Standard Tax
• Regulatory Compliance Costs & Cost Recovery• Bills 69, 68
• Rail transport
Recent New Provincial Costs• Reduction in Saskatchewan Resource Credit
from 1.0 to 0.75%
• Changes to Potash Royalty System 2013-14 & 2019-20 Budget ($117M)
• 6% PST on construction and real property services ($10 - $100’s M)
• Increased fees in The Resource Lands Regulations – increased costs of over $25 million in new fees (405% increase) in two years to companies operating in NAD – ongoing
LANDLOCKED – must get product to market -RAIL
FUTURE ECONOMY - China, India,
Africa & “Clean Economy”• BUT Positive Long Term Fundamentals
• SK uniquely situated to feed and fuel the world
• DRIVERS: GROWING GLOBAL POPULATION
CLIMATE CHANGE
BASELOAD ENERGY SECURITY
• MINERS MATH = > FOOD + > CLEAN
ENERGY ON < LAND
• Limited local potash and uranium resources
• Growing industrialized middle class (9.2 B by 2050)
• China consumed 5% of world’s base metals in 1980s v ~30% today
• Trade Agreements • Federal Nuclear Cooperation Agreements - China
and India
• Canada – European Free Trade Agreement
Sask Resources Key to Global
Sustainability
1. Food Security: In the next 40 years the equivalent of all of the food produced in the last 10,000 years • Crop production must increase by 70% by
2050
2. Energy Security
• Globally, 1 billion people still live without electricity. Access to energy is essential to reduce poverty.
• Energy consumption increase by 75% by 2040 with 60% of growth in non-OECD countries
• Strong nuclear growth • 55 reactors under construction
CANADIAN MINERAL EXPLORATION (2017-19)
Quebec ($555 M); Ontario ($517 M); BC ($318 M); SK ($273 M); YK
($129 M); NT ($144 M); NWT ($67 M); NFD ($407 M)
Saskatchewan Exploration Expenditures
• Typically >$100M/yr Uranium Exploration
• Potash Exploration “anomaly”
• Low precious, base and REE metals; recent increase in diamonds
• Recent interest in “battery metals” – Co, Ni, Li (UEX, KoBold, Fortune)
MINING AND PUBLIC SUPPORT
2016 Survey of 1000 SK residents says:
• 89% are supportive of mining industry
• 97% believe it is important to the province
• 75% are confident in the regulatory process.
• EA Reviews and licensing hearing are inclusive - Indigenous communities
and leaders encouraged and supported in participating
GLOBAL MARKETS & LOCAL DECISIONS
Tailwinds
SK continually ranks in the Top 3 in the World in terms of overall Investment Attraction (Geological Potential and Policy/Regulatory Environment) ☺ World Class Geology
☺ Accessible Data Library
☺ Accessible SME
☺ SMETC
☺ TMEIP ($750K/yr - max $50K)
☺ Access to Lands
☺ Predictable and Transparent
GLOBAL MARKETS & LOCAL DECISIONS
Headwinds: SPECIES AT RISK ACT – Woodland Caribou
Boreal (Woodland) Caribou listed
by COSEWIC as “threatened”
-May 2009 ECCC releases
“Scientific Review” document
-SMA identifies many issues
including:
• ECCC identifies 8 “Local
Population Units”; 7 of which
are identified as “not self-
sustaining; while MOE identifies
2 Local Population Units
• High Fire/Natural Disturbance
• Low Anthropogenic Disturbance
• Fire disturbance puts SK over
“threshold limits” for
development (35 % disturbed)
• Woodland caribou routinely
documented in EA;
GLOBAL MARKETS & LOCAL DECISIONS
SPECIES AT RISK ACT – Woodland Caribou
-2009 ECCC published initial documents
ECCC - 2011 Initial Draft Recovery Strategy for Woodland Caribou – N. SK identified as:
- “not self-sustaining populations”
- 7 populations identified within range
2012 – Draft Recovery Strategy – ECCC acknowledged that their model was not appropriate for SK because of high fire and low anthro; more study required
-2 populations identified – SK1 and SK2
GLOBAL MARKETS & LOCAL DECISIONSSPECIES AT RISK ACT – Woodland Caribou
SPECIES AT RISK ACT –Woodland Caribou
• Dr. P. McLoughlin, U of S conducted a 5 year, ~$2.5 M study of Woodland Caribou population in
SK1 Region supported by coalition of fed, prov governments & industry
• Study Area - 94 female adult caribou were collared – data locations
• Supplemented by Partner Collar Data (Cameco)
• Most thorough study of woodland caribou population dynamics in all of Canada
• Also researched predator dynamics, terrain analysis (habitat) with incorporation of TEK.
GLOBAL MARKETS & LOCAL DECISIONSSPECIES AT RISK ACT – Woodland Caribou
Results supported 19 conclusions including:
• Woodland caribou in SK1 is “currently one of a
large and self-sustaining population that is
arguably one of the more secure populations of
boreal caribou in Canada.”
• the caribou population occupies some of the most
pristine habitat available to non-migratory, forest-
dwelling caribou in Canada, with very low levels
of anthropogenic disturbance (~3% of habitat
occurs within 500 m of any industrial footprint and
linear features)
• although being subject to a large fire footprint in
the past 40 years, the SK1 unit retains large
tracts of high-quality habitat available for
caribou
• Caribou utilize remnant forest islands within
burns; some of the most favourable calving areas
ie. Critical habitat
• Low predator density (wolves, bears)
GLOBAL MARKETS & LOCAL DECISIONSSPECIES AT RISK ACT – Woodland Caribou – Federal Government
• June 2019 ECCC Amends/Updates Recovery Strategy
for Woodland Caribou
• includes (some) scientific and peer-reviewed work of
Dr. McLoughlin’s.
• Population in SK1 now deemed self-sustaining
• Critical habitat (CH) identified
• Specific disturbance thresholds identified
• Maintain 40% undisturbed habitat
• Cap anthropogenic disturbance at 5% (was 3%)
BUT
• ECCC did not include all best available information
from study including:
• Sensitivity assessment for anthropogenic
disturbance (500 m buffer on all anthroprogenic
disturbance)
• Waterbodies & 100% fire area retained; no
acknowledgement of remnant islands in burns as CH
–– Additional conservatism applied to SK1 range
GLOBAL MARKETS & LOCAL DECISIONSSPECIES AT RISK ACT – Woodland Caribou – SK Government
• Range Plans required by ECCC five years following
finalization of 2012 Recovery Strategy Guide the protection of critical habitat & the recovery of boreal
caribou
Outline how a given range will be managed to maintain or attain a
minimum of 65% undisturbed habitat over time
• Draft SK2 Range Plan released by MOE (ie Gov of
SK) Oct 2017 Woodland caribou population in SK2 is not self-sustaining/self-
sustaining; higher anthro disturbance
SMA comments provided in Dec 2017; template for SK1
• Final SK2 Central Range Plan released July 2019
BUT MOE did not use best available science/data as provided by
Dr. McLoughlin’s study re buffering areas; water, utilization of
burn areas and forests <40 years
As a result, SK2 Central is 42.8% disturbed and management
actions will now be required to lower disturbance to 35%
Limit industrial, infrastructure, municipal activity – anything
that causes a “disturbance”
Implications for SK1 Region
GLOBAL MARKETS & LOCAL DECISIONS
Headwinds: ACCESS TO LANDS: RAN, ECCC Initiatives
• Fundamental requirement of successful exploration and mineral
development is having access to lands
• Recognize the need and benefits of “Protected Areas”
• SK has best process in Canada for making informed decisions regarding
“Protected Areas/RANs/Parks” – including Mineral Resource Assessments
– MOU with MOE and MER
• >90% land in northern SK is provincial Crown Land – ie surface and
subsurface ownership rights are within provincial jurisdiction
• GOC/ECCC recently announced initiatives for stakeholders to nominate
lands for “protection” even though it has no jurisdiction over land
• Nature Fund - $2 M to “Strategic Hub (ENGO) to develop collaborative
approach re: woodland caribou; CPAWS – Cumberland Delta
• Pathway to 2020 – UN Convention. GOC committed to Target 1 Goal of at
least 17% area conserved through protected areas (GOS - 12%)
• Indigenous Protected and Conserved Areas (IPAC) – offer of $3 M over
4 years for Athabasca Denesuline to establish 591,000 ha of IPCA’s within
the Selwyn Lake and Tazin lake EcoRegions to protect Species at Risks
such as Boreal Caribou from “industrial impacts”
• GOC/ECCC initiatives are Independent of Provincial RAN process -
homestretch to designate Tazin Lake (111,746 ha) and CR also on
Chappuis/Fontaine Lakes (NTS 74O), Misaw Lake
• Governments and Stakeholders need to collaborate to ensure decisions
are informed
• Unintended (?) Consequence - Withdrawal of prospective mineral lands
would further educe economic opportunities of region
GLOBAL MARKETS & LOCAL DECISIONS
Headwinds: RATIONAL & TRANSPARENT FEE SCHEDULES
• In March 2019, the GOS announced,
without any consultation, a number of
extreme & unwarranted fee increases to
provincial Crown Lands (The Crown
Resource Land Regulations, 2019
• Includes exploration-related fees (TWC,
MUP etc) and Surface Lease Fees (ML -
disturbed areas)
• Represented an impact of >$22 Million
over 5 years (>400% increase) for
Surface Lease Fees and $215K for
exploration over 5 years;
• Insensitive to current, prolonged
uranium market conditions and severe
cost-cutting measures companies were
already undertaking
GLOBAL MARKETS & LOCAL DECISIONS
Headwinds: PST
• Impact of PST on Exploration Programs
• Changes to The Provincial Sales Tax Act related to
the Government of Saskatchewan 2017-18 budget
increase the PST from 5 – 6% and broadened the
base of eligible PST categories. One of these
categories PST was introduced to was drilling and
drilling services. Subsequently, a PST exemption
related to drilling and drilling services, was ONLY
provided to the oil and gas sector
• Drilling comprises a significant (typically ~50%) of an
exploration program’s budget.
• Estimated that the application of the PST to
exploration drilling redirects between $4 - $6M per
year from exploration activities to government
general revenue funds
• Directly reduces the chances of exploration success
as ultimately < m drilled.
• Impact of PST on capital projects – material ($10 –
100’s M)
WHERE WILL RESOURCES COME FROM?
We Know
Future Global Demand for potash and uranium
Saskatchewan can SUPPLY potash and uranium for decades
Mining companies in SK have a smaller environmental footprint than
global competitors (GHG emissions, water usage)
Mining Companies in SK provide greater social benefits to local
communities (employment, business, community support)
Geological framework present in SK
TBD
? Policy & Regulatory Framework - Can mining operations in SK remain
globally competitive with ongoing escalation in costs imposed by
government(s)
1500 - 2002 Victoria Avenue
Regina, SK S4P 0R7
Phone 306-757-9505
Fax 306-569-1085
Saskatchewan Mining:
Supporting Local and Global
Communities