Mining was ignored in Quebec for the better part of a generation.

It was considered by many a sunset industry, a vestige of a less advanced past. In short, it was unworthy of the children of the Quiet Revolution.

Workmen at an open-pit mine in Thetford-Mines, Québec in 1944. Credit: Harry Rowed. Canada. National Film Board of Canada. Photothèque. Library and Archives Canada, PA-115072

Workmen at am open-pit mine in Thetford-Mines, Québec in 1944. Credit: Harry Rowed. Canada. National Film Board of Canada. Photothèque. Library and Archives Canada, PA-115072

Paradoxically, this disdain was advantageous for the industry. Miners went about their business with relatively little interference from government, NGOs or the public at large. The political and legal environment was stable and the industry was primarily concerned with the vagaries of world commodity prices.

Things began to change in 2008. To the surprise of many, Vancouver’s authoritative Fraser Institute declared Quebec the best mining jurisdiction in the world. It remained number one for three years.

Today, Quebec has dropped to 11th place. Why?

Paradoxically, publicity and success have hurt the Quebec mining industry.

A sign of failed stewardship?

For many urban and university-educated Quebeckers the high ranking was a sign of policy and administrative failure, rather than evidence of good stewardship. Why would Quebec want to be so hospitable to a “backward” industry? Especially one that contributes just two percent of Quebec’s GDP and is relevant in only a few distant regions.

A few years later the rapid fire announcements of billion dollar projects at the height of the commodity supercycle helped mutate Quebec’s quiet discomfort into strong political pressure to review Quebec’s mining regime. This process was timidly begun by the liberals and has been accelerated by the current minority Parti Québecois government.

The result is that visibility and promises of increased investments and jobs adversely affected the Quebec mining industry.

It’s about money

The Quebec government’s main beef is centered around money.

Quebec has the highest provincial debt per capita. It is running significant deficits and needs increased revenues from all sources, lest it cut back services. In 2011, Quebec’s 23 mines paid $351 million in mining taxes to the province [PDF].

Quebec wants them to do more and wants to change tax rates and computing methodology, and impose an excess profit supertax.

While demand for increased tax revenue is part of a global trend, Quebec’s timing and, just as importantly, the way it has formulated its demands have been less than optimal.

The commodities supercycle is today less robust and prices are softer. The extra taxes would probably not make much of a dent in Quebec’s deficit. But they could slow activity in the sector. Industry has cautioned the government not to place Quebec — a relatively small mining jurisdiction with higher costs — at a competitive disadvantage.

In its dealings with industry the government has often appeared ill-prepared, and its tone, at least in public, has been adversarial and dismissive. This approach has been poorly received by industry and mining communities, and has raised concerns among foreign investors, particularly in the resource sector.

To be fair, the government has tempered its manner of late and sharpened its pencil. Three moderating factors may be at play:

  1. Quebeckers are ambivalent on the issue of mining and probably somewhere in the middle of the political spectrum. A recent poll shows that Quebeckers want limits on the expropriation powers of mines, more tax revenue and more fulsome environmental assessments. On the other hand another poll highlights strong support for the development of natural resources in general and mining in particular.
  2. Most mines are in electoral ridings whose support is required if the government hopes to win the next election. The current minority-government probably has at most another 12 to 18 months before having to call another election.
  3. Compromise is the Quebec way and the public at large eventually tires of intransigence and dogma.

As a result it is quite likely the government will impose higher taxes but do so in a way that is mindful of the development cycle of mines, including their very capital-intensive front-ended investment profile, and the weakening environment for mines.