And one for James Blunt! Mining R&D Spending in Canada

31 12 2012

A request for posts came in and reminded me that I had been sitting on this post since the summer. The purpose of the post was to brief you on what I had been doing since the sabbatical took effect and ended persisted. I will therefore not be attending this small, aptly themed, get-together:”It’s New Year and we’re all thinking about our exes” that my friend is throwing in favour of typing away my life while listening to the Buzzcocks (on repeat no less). I am calling this virtue and similarly to post-holiday bloat, this too shall pass.

I suspended the blog as I took on a job with the Department of Natural Resources and where my main tasks were to assess the benefits of certain R&D projects undertaken under the auspices of the Green Mining Initiative. I thought that was interesting but not exactly thrilling and returned to my alma mater where my main area of interest is the national system of innovation with a specific focus on university research which is turning out to be no less than a 9-to-5 fairytale.

Given this focus in my work, here’s a bit of a scan of the Research, Development and Innovation landscape pertaining to the mining industry.

Business Expenditures.

Intramural R&D expenditures by firms for mining and related activities amounted to $99 million in 2011 according to Statistics Canada. This is quite meager considering the size of the sector relative to the Canadian economy. Firms in this sector do not tend to be R&D intensive. Only seven mining firms’ made it on Re$earch Infosource Top 100 Corporate R&D Spenders despite R&D intensity metrics as low as 0.1% (Teck Resources) and as high as 3.4% (the recently acquired NeoMaterials Tech). This ranking is derived from absolute spending figures and therefore gives an edge to the token efforts of larger firms. Processing firms in the sector are more R&D intensive. Regardless, with these investment levels Canadian miners are unlikely to mine asteroids anytime soon.

Federal Expenditures

Federal support is provided by the granting councils and also by regional development agencies in the context of industry-academia partnerships. Investment in natural resources research has been deemed a priority in the 2007 Science and Technology Strategy, the statement guiding federal investments in research to boost prosperity and further strengthen certain economically crucial sectors. As a result, natural resources are generally included as a field of investigation under our sexiest boutique science and technology initiatives. They are listed below.

Through the Natural Science and Engineering Research Council, about $7 million was provided in 2011-12 for about 130 projects dealing with the economic aspects of prospecting, mining exploration, extraction and processing. Other funding may have been provided for knowledge advancement in earth sciences, engineering and environmental research although I cannot be disaggregate the figures reported.

Network of Centre of Excellence (NCE) are knowledge mobilization partnerships intended to build critical mass in certain research areas. Under NCE programming mining along with other extractive industries are considered in the context of two Centres of Excellence for the Commercialization of Research (CECRs). CECRs usually select promising research that they seek to further develop to allow technologies to be deployed. They operate in partnerships with the private sector.

The LookNORTH Centre was provided approximately $7 million for the 2011-16 period, leveraging a mere $236,000 from private sector contributions which is low by CECR standards but could be explained by the fact they have small- and medium-size enterprises as partners. It seeks to develop remote sensing technologies to deploy in the Canadian north. Responsible resource development in the North is all the rage.
TechTerra was provided just under $12 million for the 2009-14 period, leveraging over $3.5 million to develop intelligent, integrated resource management tools to observe, monitor, forecast and manage Alberta’s land and natural resources. I understand this will deal primarily with oil sands although the Centre appears to consider mining projects as well.

Canada Research Chairs are researchers which play a specific role in fulfilling their universities strategic research plans. Allocation is competitive. There are currently four researchers holding Canada Research Chair positions focused on mining and mineral processing. Three out of four researchers hail from the U-15 and I am finding this quite surprising as I would have expected regional universities to be more represented. In total about $5 million is provided to those researchers for a 5 to 7 year period.

Canada Excellence Research Chairs are in a way superlative research chairs. They’re research top-guns attracted with very fat grants of up to $10 million each. It seems a very convincing way of attracting top-researchers and unless competitive counter-offers are provided from Ivy League it achieves that fairly well. This is how we attracted UK’s own Dr. Graham Pearson at the University of Alberta to conduct research related to diamond mining in the Arctic. Again keeping with resource development in the North being all the rage.

Higher education expenditures amounts to roughly half the business expenditures. Given the importance of mining in providing employment in remote areas, I am advancing that contributions made by regional development agencies for industry academia collaboration may be significant although much harder to track. In the interest of new year celebrations, and because the Buzzcocks are working my nerves, I will spare you from details about government’s intramural expenditures on mining research.

Now don’t be sad. You can expect little activity on this blog in 2013 as I am caught up in professional bliss and have found more fitting extracurricular activities (e.g.: slicing and dicing of FIUC data at cafés). I am very satisfied with what JustDigging has accomplished and my friends will tell you how unbearable my constant reporting of viewing statistics was in the blog’s golden age. I really enjoyed blogging and it is likely that I will pursue other blog ventures in the future. Perhaps a blog discussing open innovation or something light for everyday banter which I would like to call “Flirting with Baristas”. In any case James, it’s been a pleasure. Happy New Year and Good Bye!

The Sabbatical is Over

3 09 2012

I had to put this blog on hold last year to prevent perceptions of conflict of interest with a job that I took on in August. Such concerns are no longer relevant now that I have returned to my alma mater. I will resume posting in the next few days. I am definitely looking forward to writing more and I think it will be interesting to write in the current context. Stay tuned.

Flash News: Update on Plenty

17 11 2011

I have been following mining events more closely and this week it appears that a number of topics covered in previous entries have evolved to a significant extent. I am summarizing those in the present list post.

In a rare alignment of activists and large corporations’ mindset, Fortescue is once again sharing its beliefs in the conspirationists leanings of the Australian Government and the Super Majors. Mining

Rarely said about taxation. Well done Zambia. Financial Post

Steady progress is reported on Nautilus Minerals’ Solwara 1, its marine copper and gold mining project in the Bismark Sea (Papua New Guinea). Production should begin in late 2013. Mining

The Oppenheimers swapping diamonds for property development? Botswana Guardian (listen to an interview with Nicky Oppenheimer on Mineweb)

Forces at Play in Afghanistan’s resource extraction race. AFP

On the issue of mine waste. Infomine



New to Blog Roll: Minerals Make Life Blog

1 11 2011

The National Mining Association has re-launched its Minerals Make Life blog. Its blog entries focus on policy issues, innovation, security and the contribution of the mining sector to economic growth. The blog also contain a number of interesting information resources such as factsheets,slide shows, short movies and good reports. This report should be your reading this week.

Industry 1. Australian Government – 7.5%

24 09 2011

Oh well. I was supposed to keep quiet while my new job reviews whether it is cool for me keep my blog active. But this is one of those “I hate to say I told you so” moments. Cue The Hives.

As you can see from the previous post, I have dedicated a lot of attention to Australia’s Mineral Resource Rent Tax and questioned whether the tax would raise revenues to the extent suggested by the Australian Treasury. Well my answer came this week in the media from Sam Welsh, executive director of Rio Tinto.  Mr. Walsh said : “The final tax rate had been reduced from 40% to an effective 22.5% rate in the minerals resource rent tax (MRRT)” and also added that it was the best that could be done with the current Government.

Industry 1. Australian Government – 7.5%

An effective rate 22.5 compares favourably to the 28% statutory rate applicable to all corporate profits. Although I am comparing effective and statutory rates, it appears fair to conclude from the large gap in those rates that in negotiating, the industry took advantage of the Government’s unwillingness to concede defeat and got itself a tax rebate.

Australia Released Draft Legislation

19 06 2011

Details are out! When first proposed in 2010, Australia’s Mineral Resource Rent Tax (MRRT) was expected to raise A$3 billion in its first year. After ruthless negotiations, the draft legislation of the MRRT was released last Friday and despite several concessions it would still raise A$7.7 billion in revenue in its first two years. This is almost unbelievable considering the much lower than anticipated applicable rate (30 instead of 40 percent) and narrower base (iron ore and coal miners (320 firms) instead of all mining firms as initially planned (2500 firms)).

The preliminary exposure draft legislation is based on the recommendations of the Policy Transition Group, released in July 2010. The main components are summarized below.

  • The 30 percent tax rate will be kept and will begin to be applied on July 1st, 2012;
  •  Small miners with assessable profits of under A$50 million a year will be exempted from the tax;
  •  Investment-wise, firms will benefit from the immediate expensing of new investments as well as a 25 per cent extraction allowance to “further shield from tax the important value add and capital that mining companies bring to mineral extraction”. Moreover, past investments will be recognized at market value and written down over a 5 year period.
  • In addition to the transferability of deductions (which allows to offset the MRRT with deductions accumulated through other projects’ construction phase), unutilised tax losses will be carried forward at the government long-term bond rate plus 7 percent;
  • Royalties paid at state level will be fully credited by the national government and unused credits for royalties paid will also be carried forward under the same terms as unutilized tax losses but will not be transferrable between projects or refundable;

Some sticky points remain regarding the following issues:

  •  Pricing arrangements will be established to ensure only the value of minerals extracted will be taxed;
  •  The tax point for underground coal mines; and
  •  The valuation of multiple tenements within an area (and the decision to consider those as part of a single or multiple projects for tax purposes) will influence tax payable

The above list shows the extent to which the MRRT is full of deductions. I’m one sceptical nerd. I cannot quite figure how a lower rate and a narrower tax base allow for more revenue to be collected. The Australian Treasury stated that the difference in revenue collected is attributable to strong iron ore and coal prices and the fact that very little revenues was expected to be raised from other minerals. The coal and iron ore prices used in the revenue estimate must have been ridiculously high and the opportunities for tax planning (increasing with the complexity of the tax design) must have been ignored.

The exposure draft released by the Government is not exhaustive and is intended to provide stakeholders with an early overview of the legislation. The Government will release a second and final draft for public consultation later in 2011. If you are bold, courageous and have a lot of time on your hands; here is the exposure draft and its explanatory companion document.

Forsys and GFI Settle amid Wikileaks Intrigue

8 03 2011

In one of my very first entries, I discussed the failed acquisition of Forsys, a Canadian junior with a fully-permitted uranium project in Namibia, by Georges Forest International (GFI), a Belgian firm with questionable business practices. After being temporarily halted by Industry Canada, the transaction was called off due to GFI’s failure to transfer the funds. I speculated on the cause in a subsequent entry.

Both companies have since attempted to collect funds from each other (either as damages or break fee). A settlement has been reached. Forsys will not have to pay damages to GFI although it is unknown, yet likely that it will receive compensation from the Belgian firm. This is still no happy ending for Forsys whose share price is standing below half of the value envisioned by the 2009 deal.

According to a diplomatic cable made available to Wikileaks, Industry Canada halted the transaction under the national security provisions of the Investment Canada Act in 2009. Washington and Ottawa worried that GFI would provide uranium to Iran if it secured Forsys’ mine in Namibia. GFI is alleged to have held discussions with Iranian officials regarding the supply of uranium.