Northwestern Ontario is seeing some good news with respect
to the mining sector. One recognition of
this was the recent announcement regarding Lakehead University and Impala
Canada launching a new
mining research project. The five
year project involves the creation of an industrial research chair in mineral
exploration to be held by Lakehead University geologist Peter Hollings
and it is good to see investment in regional knowledge. The prospects for continued growth have also
been put forth by the Community Economic Development Corporation in their new mining
readiness strategy which was announced this week.
The strategy is designed to help Thunder Bay capitalize on
opportunities from the projected continued development in the region’s mining
sector. It estimates
that continued development of the sector with Thunder Bay benefiting from
supply chain spillovers in mining supply, workforce training, transportation
and electrical infrastructure, and research will be substantial. The current six operating mines in the region
may double to 15 essentially doubling the workforce from the current 3600 with
peak employment reaching just over 7000 by 2028. However, there are challenges, not least of
which is ensuring a supply of electricity as well as transport infrastructure.
This strategy is laden with optimism and good news as befits a municipal community economic
development organization. The employment
forecast is probably a bit rosy given that mining is not really a labor
intensive activity and benefiting from the employment opportunities requires a
lot of knowledge and skill intensive labor not least of which are skilled
trades such as carpenters and plumbers – already in short supply in Thunder Bay
given they are spending their time fixing leaky pipes – as well as trained
technologists and scientists.
They could probably also use some economic expertise but
sadly many in government economic development organizations still do not understand
the distinction between a business and economics graduate and prefer the
boosterism and optimism of a business graduate rather than the more realistic
analysis of an economist. Bosses
generally only like to hear what they can do rather than what they cannot or
should not do. Just ask the management at
Laurentian University how things are going so far?
As well, included among the new projected projects is of
course the Ring of Fire
chromite deposit which has been on the verge of development for a decade now and we are
still waiting. The real challenge in developing
the deposit is not even transport infrastructure or resolving negotiations with
affected First Nations. All of that
would actually fall into place rather quickly if the key variable trended
dramatically upwards –the price of chromite. Indeed,
all of the rosy projections for mining development hinge on a continued upturn
in commodity prices. It is easier to
negotiate something and develop it if you know there is indeed a big payoff
coming and what size it might be.
The good news is commodity prices seem
to be doing well. Silver, for
example, is at an eight-year high. Gold rose dramatically in 2019 and 2020
though it seems to have declined a bit for 2021. Palladium, nickel, copper and zinc are all up
– however, chromium is down about 14 percent for the year. Indeed, the price of high-carbon
ferrochromium appears to have come down about 40 percent over the last two
years. Will the demand for chromium pick
up as economies recover in the post-pandemic period? Chromium is used to harden steel and make
stainless steel, so it depends on what the demand for things that use stainless
steel is going to be like. Given the shift
away from commuting, it certainly won’t come from the demand for automobiles.
In the end, the mining readiness strategy is a business case
rather than an economic case with the economics consisting largely of the perfunctory economic
impact study as the ceremonial accompaniment justifying the recommendations. The recommendations include such potboilers as “promote Thunder Bay as a full-service
community” – something right out of the 1970s - as well as “regular government communications
on mining”, “prioritize municipal infrastructure development” and “enhance
existing mining supply/service directory”.
One suspects that ultimately the mining boom will occur more as a result
of rising commodity prices and private sector initiative than anything a community economic development organization can do.
One more thing. The
mining readiness strategy is mainly concerned with getting things in place to help
support and capitalize on mining development that in the end is really out of
the hands of the Economic Development Corporation. It is important to be ready
for when it happens. It is also important to be ready for after it
happens. Economic development thinking in Thunder
Bay and the region is entirely focused on short term up front economic and employment
benefits. That is understandable given the generally low growth in the region and the hunger for jobs. It is also the legacy of a natural
resource extraction mentality that has always assumed that there is a vast
stock of resources and once one larder has been emptied, you can move to the
next one. Where the next larder will be is usually not on the radar until the first one is empty.
How can the benefits of a growing mining sector be channeled
into long-term benefits via either investment of resource rents and revenues or
the use of acquired expertise to service mining projects around the world and
create future high-end employment locally? What is the plan for when current
mines near the end of their production in terms of creating opportunities based
on those employed in a project that is wrapping up? I suppose no one is really thinking about
that but then I suppose one of the features of a natural resource economy is boom
and bust and one enjoys the boom and then worries about the bust when it
happens and hopes it is somebody else’s problem. In northern Ontario, it is always clear
sailing ahead and one cannot rightly imagine a morning without economic challenges for
its children.
