UNFAIR was the word Jim Gowans, president of DE BEERS CANADA, wrote large to describe the Ontario governments new 13% royalty on diamond production. In correspondence this week he expressed disappointment, calling this money grab a royalty on a specific company and an about-face from the promises made by Ontario Premier Dalton McGuinty last June when he attended the official ground-breaking ceremony at the companys Victor diamond project.
Gowans outlined two reasons for his disappointment. First, such a high royalty will further discourage junior companies, the backbone of new discovery, who are already moving away from diamonds because of the low expectation of success. And second, the diamond mining industry doesnt need a third disadvantage, which this royalty is, on top of the existing risk factors (remote locations, lack of infrastructure, land use uncertainty) and high exploration costs due to the necessity of conducting large bulk-sampling programs.
A diamond mine typically requires an investment of $100 million-plus before reaching an investment decision, Gowans noted, the most costly sector in the mining industry.
I am also concerned for Northern Ontario developmentthe communities and First Nations communities that make up this vast remote area of our province, he continued. Victor is the only mining project, actually, the only major resource development project, being built right now in Northern Ontario. So why penalize the one company willing to invest in this area, which is already suffering from lack of development, lack of infrastructure, and the additional lack of clarity concerning Aboriginal land claims, etc.
The government is trying to increase its revenues… What it fails to understand is that there is a large spin-off effect for a resource development project. The projection on Victor is $6.7 billion in economic impacts from this $1-billion project. If the government wants to have a positive impact and gain revenues, it should be encouraging investments in remote areas of Ontario, not subjecting these investments to penalties, Gowans said.
The Ontario government has always said it wants to harmonize its royalty system to those of other provinces and territories. Gowans added that other jurisdictions apply royalties equally to all minerals, an arrangement that is at least fair. The diamond royalty in Ontario is being applied to one mineral, not all, so the Ontario royalty doesnt even harmonize within itself, let alone other jurisdictions in Canada. This is a contradiction, he added.
A punitive diamond royalty is a strange way for the Ontario government to promote the Fairness: Its time for fairness for all Canadians slogan so prominently displayed on its websites.
We must support De Beers Canada and Gowans as they fight to have this onerous 13% royalty reduced or removed. Gowans knows what he is talking about, after more than 30 years in the mining industry and having worked on copper-moly, lead-zinc, gold-silver, PGM and nickel projects.
We in Ontario have added leverage to use against McGuintys government. This is an election year, and by making this royalty an election issue, we just might get the desired result, either by electing a government that will remove it or by forcing a re-elected government to reduce it.
Not only the mining industry, but the First Nations and urban populations can agitate for fair treatment of all people.