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Report: mines are a cash cow for economy

March 1, 2008
by Heidi Ulrichsen
In: News with 0 Comments

Every average-sized mine in Ontario is a cash cow for the economy, adding $280 million each year directly and indirectly to the province’s GDP while in full operation, according to a report commissioned by the Ontario Mining Association (OMA).

“The importance of this report is to show that mining is a winner for what it does to the economy,” said Peter McBride, manager of communications for the OMA.

“Most of the benefits of the mine stay local – about an hour away from the headframe. What we know from the study as well is that it’s one of the best prospects for future growth and development, certainly for Northern Ontario and for First Nations.”

Even during the construction phase of a mine, $140 million is added to the province’s GDP each year, according to the report.

The impact of just one mine on the revenues to all three levels of government is large. During the construction phase, government collects a total of $49 million in tax revenues. During production, this rises to almost $84 million per year.

Employment

Two thousand, well-paying direct and indirect jobs are generated directly and indirectly by a mine during construction, and during production, 2,300 jobs are created.

McBride said he hopes municipal, provincial and federal governments will be encouraged to make mining-friendly policy decisions now that information about the economic importance of mines is available.

The 29-page document, which was released in December 2007, is entitled Ontario Mining: A Partner in Prosperity Building – The Economic Impacts of a “Representative Mine” in Ontario.

The report defines a representative mine as a medium-sized mine located in a Northern Ontario city such as Sudbury, which produces copper and nickel.

“To be conservative, we wanted to assume it was in a place where there’s already a lot of infrastructure for communications, electricity, roads, schools and hospital,” said McBride.

“You could use De Beers building the Victor Mine. That’s not representative because they have to build all of their own infrastructure.”

University of Toronto economics professors Peter Dungan and Steve Murphy wrote the report for the OMA.

Dungan is the author of a 1997 book called Rock Solid: The Impact of the Mining and Primary Metals Industry on the Canadian Economy, and Murphy has collaborated with the OMA to produce previous studies.

The OMA has been producing statistics about the province’s mining industry since 1992, but the organization decided to do a more specific study about the impact of a single mine, and enlisted the help of the two professors, said McBride.

They used past statistics produced by the OMA, as well as statistics from the Ministry of Northern Development and Mines, Statistics Canada, Natural Resources Canada, the Workplace Safety and Insurance Board and unions.

Benefits

Economic benefits produced by a representative mine are “in many ways like the geological nature of the mine itself: That is, the bulk of the activity is hidden below the ground and not readily visible on first glance,” the report states.

On the surface are the direct impacts of the mine, including a $150 million a year contribution to the province’s GDP.

There are also 480 full-time mine employees earning an average wage of $85,000 a year during production ($145,000 a year when employer contributions such as employment insurance, Canada Pension Plan, employee benefits and pensions are included).

One level below the surface are the purchases made by mining companies and mining suppliers.

Calculations show that the total impact at this level amounts to 1,100 jobs, approximately $81 million of GDP and more than $52 million for labour compensation. Employees of supply and service companies earn approximately $45,000 a year in wages and benefits.

At the second level below the surface are the impacts of mine and mining supply and service sector employees’ spending in the community.

The authors of the report calculate that employment created by the spending of wages translates into just under 700 jobs, considerably higher than the 480 people employed directly by the mine. Average labour compensation per employee is almost $44,000.

They also examine how much of the positive economic impact of the mine stays in the community in which it is located.

The report shows that of the 2,300 jobs generated by a mine, over 1,500 are in the local area. Total local labour compensation is $115 million.

Other economic and social impacts of a mine are also estimated.  This includes  the need for public sector workers such as teachers and police, and contributions by the mining communities to projects such as medical centres and sports facilities.

“A representative mine situated in Northern Ontario, as most of them are, also makes a special contribution to the well-being and development of aboriginal communities,” the report said.

“It targets efforts to employ and make available entrepreneurial activities to aboriginal workers in mining activities and it sustains and develops the surrounding communities.”

www.oma.on.ca

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