Canadian mining industry warns Quebec over 30% royalty plan

The Mining Association of Canada (MAC) has warned the Quebec government over its plans to tax the gross value of annual production at 5% and to increase royalties up to 30%, in the case of "super profits."

MAC president and CEO Pierre Gratton maintains that the new levies will have "detrimental economic effects to Quebec and Canada's economy as a whole."

"The new regime would tarnish Quebec's reputation as a mining-friendly jurisdiction for investment. Moreover, from a global mining company standpoint looking to build its next project, I am concerned that there will be little distinction between Quebec and the rest of Canada, thus harming the country's reputation as a whole."

MAC is worried that Quebec's actions will reduce foreign mining investment across the country, as global competition has become increasingly fierce. Less foreign investment would reduce the total federal and provincial revenue from international mining projects and would result in "a significant loss of well-paying jobs… and spin-off business opportunities" for Canadians.

"This government's approach reveals a limited knowledge of the sector and the global reality in which it operates today. The actions of this government go against decades of sound economic policies advanced by Quebec governments of all political stripes, including the Parti Quebecois," said Gratton.

The Association minière du Quebec (AMQ) has been vocal within the province to sound the alarm of the negatives consequences that would ensue if the new royalty regime, as proposed, takes hold. According to the AMQ, the current level of taxation stemming from mining activity already provides significant economic benefits to the majority of Quebec residents.

"The hikes are positioned as just penalizing the mining industry, whereas in reality, they put into peril the livelihoods of thousands of families in the province who rely on the industry for employment – both direct and indirect jobs. The fact is, companies will simply find somewhere else to mine," stated Josée Méthot, President of the AMQ.

Last week Goldcorp (TSX:G)(NYSE:GG) senior vice president of corporate affairs, Brent Bergeron, told Kitco News that Quebec is adopting a near-sighted approach by enacting the new levies. Bergeron discussed Goldcorp's Éléonore project in the context of the proposed taxes and royalties:

"The changes in the regime that they are making now, in our opinion, will most likely benefit the government in the short term. If you look at the decision in the long term — will it affect our decision to stop building Éléonore? Of course not. However, (when) we look at expansions of maybe other projects in the province or expanding Éléonore itself at a future date, we’ll definitely have to take a look at that very carefully.”

 Sources: Canada News Wire; Kitco News