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.
