PDAC 2013

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TUESDAY, MARCH, 5, 2013

FEATURED OPINION

Politicians hungrily eye mining boom Tasha Kheiriddin

Barrick Gold's Jonathan Drimmer speaks to conference attendees about corruption laws at the Prospectors and

iPolitics

Developers Association of Canada's conference at the Metro Toronto Convention Centre, Monday.

Canada's corruption laws joining big leagues: panelists James Munson

Canada's corruption laws will soon be in line with more sweeping legislation in the U.S. and U.K., as the mining industry grapples with ever-more complex definitions of what constitutes a bribe, a major mineral conference heard Monday.

Ottawa's Corruption of Foreign Public Officials Act (CFPOA) has been criticized as the weakest link among western anti-corruption rules, a problem exacerbated by the sheer size of Canada's extractive industries, the biggest in the world in many respects.

In February, Foreign Affairs Minister John Baird revealed amendments to CFPOA that will give it a broader net to catch Canadians who pay money to public servants, politicians and government-owned bodies to advance their business interests.

An exemption for non-profits

under CFPOA will also be removed.

During a seminar Monday morning at the Prospectors and Developers Association of Canada's (PDAC) annual conference in Toronto — one of the world's biggest mining meetings — several experts explained that the changes will bring Canada in league with British and American standards.

The U.K's Bribery Act, amended to increase its scope in 2010, applies to any company with a business operating in the U.K. That means if a French company has a subsidiary office in London and dozens of other branches around the world, the Bribery Act applies to actions done by any part of the firm, said Mara Senn, a lawyer with Arnold & Porter LLP. The U.S.'s rules affect any American citizen or company operating anywhere in the world, as well as any act happening within the country's borders.

"Any act that ultimately touches the United States or is directed to the United States is also covered," said Jonathan Drimmer, vice-president and assistant general counsel with Barrick Gold.

Recently, the Securities and Exchange Commission (SEC) successfully charged two people from Hungary under the U.S. Foreign Corruption Practices Act. One individual had sent an email to the other relating to the act of corruption and that email was routed through the United States.

"That was enough, the court said, to establish jurisdiction in the U.S.," said Drimmer.

Canada's CFPOA has long lacked a so-called "nationality clause" that would explicitly target any Canadian person or company.

The act only applies to bribery that has a "real and substantial link between the offence and Canada," vague terminology that critics say

leaves enough room for corrupt companies to evade the law.

Baird's amendments include a nationality clause as well as the removal of the facilitation payment exemption.

A facilitation payment is defined in the current act as any payment made to expedite or secure the performance of a foreign official — something that lawyers have said sounds an awful lot like a bribe.

The exemption's elimination will dramatically reduce the ability of companies to use it as a loophole when under investigation by the RCMP, which enforces the CFPAO. Canada will also match the U.K. and the U.S. by now including "books and record-keeping" infractions, which will penalizing companies for not keeping track of government payouts where bribing might be taking place, said the Continued on pg. 14

Welcome to the twenty-first century gold rush. Or lithium, chromite or iron: take your pick. This week the Toronto Convention Center turned into the set of Bonanza, as over 30,000 miners, prospectors and processors convened for the annual meeting and trade show of the Prospectors and Developers Association of Canada (PDAC), the largest such gathering in the world.

Not surprisingly, the political class turned out in force. The federal government dispatched forty Conservative MPs, its biggest contingent ever. Treasury Board President and Minister for FedNor Tony Clement kicked off the festivities Sunday night, speaking about the development of Northern Ontario’s “Ring of Fire”. Natural Resources Minister Joe Oliver gave the next morning’s keynote. Newly-minted Liberal Ontario Premier Kathleen Wynne cut the ribbon on the Ontario Pavilion Monday, while Parti Quebecois Natural Resources Minister Martine Ouellette held court at a Quebec reception the previous evening.

Ottawa, Ontario and Quebec all have high stakes in the lucrative mining game. The federal government wants to slay the deficit, stave off the threat of America’s fiscal cliff and boost international trade.

Ontario and Quebec — both 'havenot' provinces — are grappling with the decline in their manufacturing sectors. Resource extraction could provide the ticket to prosperity for all — but it comes with a host of challenges.

Those include opposition by environmental movements and First Nations. It’s no accident that Premier Wynne opened her remarks by acknowledging that the conference was taking place on the territory of the Mississaugas of New Credit.

The Ring of Fire, which boasts over 30,000 claims and could yield one fourth of the world’s chromite, affects First Nations like the Webequie and Marten Falls, who blockaded landing strips in the area in 2010.

That same year the Liberal government of Dalton McGuinty passed the Far North Act, which gives First Nations a role in Continued on pg. 13

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for Canada. Last week the OECD released a major study of trade patterns, focusing on who is realizing the value, as opposed to the familiar measures of volumes. What industry emerged as the most significant for Canada’s exports? Mining.

But even giants have weaknesses.

Few industries are as embedded in the fabric of Canada’s economy as the mining sector.

Canada is a major mining country and a top ten global producer of seventeen key metals and minerals.

Most people know that extracting and processing these materials is an important part of Canada’s industrial sector and an essential source of GDP, jobs and government revenues throughout Canada. But, when the Canadian Chamber of Commerce undertook a study of the mining industry last summer, we did not anticipate the full breadth of mining’s contribution to our economy or its impact on “downstream” industries like insurance, finance and law.

Canadians in many professions have fought a brilliant fight to make our mining sector a world leader. Now we need to keep fighting to stay on top. There are many rivals eager to exploit any weakness. Each year the Canadian Chamber publishes our “Top 10 Barriers to Canadian Competitiveness,” identifying the biggest challenges facing Canadian business, especially problems we’ve created ourselves.

Our list of national challenges is strikingly similar to the concerns we focused on in our study of mining. Once again, the skills shortage facing firms of every stripe is identified as the principal preoccupation. The shortages facing the mining sector, however, are particularly acute. Data from the Mining Industry Human Resources Council indicate that forty percent of the industry is at least fifty years old, with one-third eligible to retire by 2015.

We know it’s big. It employs 320,000 people; it represents nearly a quarter of the value of our exports; it accounts for over one-half of all rail-freight revenues on our railways, and it is one of the largest Aboriginal employers in the country

It’s not just strong shoulders the sector will lose. Knowledge transfer will become a challenge as experienced workers depart the labour force. In some sectors the labour market shift means that increasing numbers of women, new Canadians, youth and Aboriginal peoples appear. But these groups are typically under-represented in the mining sector. In the medium-term, the need to replace older workers will outstrip the availability of younger talent in the labour pool.

We also know it’s strategically significant

Throughout Canada, the current number

of graduates from mining-specific postsecondary programs is insufficient to meet the sector’s needs — forecasted to comfortably exceed 100,000 people over the coming decade. The need for highly educated workers is increasing thanks to the importance of advanced technology in today’s mining and exploration industry. The industry will require geologists and geoscientists, metallurgists and mining engineers, as well as employees skilled in computer and information technology, among other professionals.

Access to capital is the other key challenge facing Canadian exploration companies in particular. Traditional finance models are less reliable, owing in part to decreasing commodity prices but also to steps being taken by governments across Canada that make foreign investment in the sector less attractive.

There is a particular need to revise the Foreign Affiliate Dumping provisions that drive away foreign investment in junior firms.

Our claim as a global mining capital goes beyond the simple extraction of metals and minerals in Canada or around the world. We have leveraged our metal and mineral endowment not just by extracting and processing raw materials, but also by creating and marketing the knowledge of how to effectively and responsibly develop these resources.

On March 6, I will be attending the Prospectors and Developers Association of Canada’s annual conference in Toronto, the largest annual industry gathering in Canada.

I will be carrying the message that Canada has the potential to build upon a strong base in mining technologies to become the global leader of advanced equipment, machinery

Our claim as a global mining capital goes beyond the simple extraction of metals and minerals in Canada or around the world. We have leveraged our metal and mineral endowment not just by extracting and processing raw materials, but also by creating and marketing the knowledge of how to effectively and responsibly develop these resources. and processes for the global mining industry, but that we must also take action now to preserve our competitive edge and ensure it stays razor-sharp.

Perrin Beatty is President and CEO of the Canadian Chamber of Commerce. He led the Canadian Manufacturers & Exporters from 1999-2007 and the CBC from 1995-1999. He was an MP for 21 years and served as Minister of State (Treasury Board) in Joe Clark’s government, at the time the youngest person ever to serve in a federal Cabinet. He later held six senior portfolios in subsequent PC governments.

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Competition Bureau green lights Bell's bid for Astral Craig Wong The Competition Bureau approved Bell's proposed $3.38-billion takeover of Astral Media Inc. on Monday, but is forcing the company to sell several of Astral's pay and specialty television channels.

Bell will, however, keep eight of Astral's TV channels including the Movie Network, which includes HBO Canada, and TMN Encore as well as the French-language SuperEcran, CinePop, Canal Vie, Canal D, VRAK TV, and Z Tele.

The Competition Bureau said without the sale of Astral's pay and specialty television channels the deal would likely have led to higher prices and reduced choice for television programming.

"Consumers who pay for television programming are looking for greater choice, more innovative product offerings, and reasonable prices," said John Pecman, interim competition commissioner.

"Today's agreement is essential to preserving choice for consumers and ensuring continued and effective competition in this area."

The proposed deal is still subject to review by the CRTC. The broadcast regulator rejected the deal last year, but Bell has since revised its proposal in hopes a revamped deal will be approved.

Corus Entertainment chief executive John Cassaday called the deals transformative for his company. Corus will buy the 50 per cent ownership interest in Teletoon and two Ottawa-based radio stations, CKQB-FM and CJOT-FM that it does not already own from Bell.

In addition, Corus has also signed a deal with Bell and Shaw Media to buy each of their respective 50 per cent interests in the French-language specialty channels Historia and Series+.

Separately, Corus has signed a deal with Shaw Media to buy the remaining 49 per cent stake in ABC Spark. As part of the agreement, Corus will sell its 20 per cent stake in Food Network Canada to Shaw Media.

"The consolidation of Teletoon and the addition of the popular services Historia and Series+ give Corus the scale to expand into the growing French-language specialty television market," Cassaday said in a statement.

George Cope, left, BCE president and CEO and Ian Greenberg, president and CEO of Astral Media Inc. announce the take over of Astral by Bell in a deal worth about $3.38 billion Friday, March 16, 2012 in Montreal.

"As a well-capitalized company, Corus can contribute to the growth of this market and provide new opportunities for the production community, while adding greater diversity to the system and more choice to French-speaking audiences."

Corus said the combined acquisition price for the assets was $494 million.

In addition, Bell said it will also sell the English-language Family including Disney Junior English and Disney XD services, and the French Disney Junior, Musimax and MusiquePlus services.

The approval by the Competition Bureau also includes restrictions on Bell that prevent imposing restrictive bundling

requirements on any provider seeking to carry the Movie Network or Super Ecran.

"This positive news from the Competition Bureau is a major step forward in uniting Astral and Bell Media and delivering on our promise to grow investment and competition in Canadian broadcasting," said George Cope, president and chief executive of Bell corporate parent BCE Inc. "This decision preserves the tremendous value the transaction represents to consumers, the Canadian media community, and Astral and Bell shareholders."

Eamon Hoey of Hoey Associates said the Competition Bureau ruling will make it more difficult for the CRTC to ultimately reject

THE CANADIAN PRESS/ Paul Chiasson

the deal, even though it turned it down last year.

But he said he himself has not changed his mind that it puts too much media control in the hands of one corporation.

"My view is it's bad for the country and it's bad for consumers. We have far too much concentration in the ownership of the media," he said, adding he would prefer that Bell used its clout to expand in its core telecom business rather than "wandering in and out" of non-related holdings.

The CRTC is expected to announce a decision on new public hearings this week.

Bell corporate parent BCE Inc. has said it expects that its new proposal to buy Astral Media will

address the federal regulator's concerns.

When the CRTC killed the deal last year, it said the acquisition wasn't in the best interests of Canadians and would have resulted in an unprecedented level of concentration in the Canadian marketplace.

Astral has 25 specialty TV services, including the Movie Network, Family Channel and Disney XD, and 84 radio stations.

Bell, owner of the CTV TV network, has said it wants to put Astral's content on smartphones, tablets, computers and traditional TVs, and to compete with foreign online competitors such as Netflix.

$89.33 in intraday trading. Volume was 19 percent below the 100-day average for the time of day at 2:39 p.m.

WTI has dropped 8.3 percent from this year’s high of $98.24 on Jan. 30 as demand forecasts weakened and rising production pushed U.S. inventories to 377.5 million barrels in the week ended Feb. 22, the most since July 20.

The International Energy

Agency on Feb. 13 trimmed forecasts for 2013 global oil demand for the first time in three months.

The Paris-based agency reduced its demand forecast by 90,000 barrels a day.

“China brought further demand worries,” said Bill Baruch, a senior market strategist at Iitrader.com in Chicago. “We broke a key technical level at $90 and the momentum is on the down side.”

The Canadian Press

Crude drops below $90 on signs of slowing Chinese growth Bloomberg West Texas Intermediate crude fell below $90 a barrel for the first time in 2013 as service industries in China expanded at the weakest pace in five months, adding to speculation that demand growth is slowing.

Prices dropped for the seventh time in nine days as the expansion of the non-manufacturing

industry in China, the world’s largest oil-consuming country after the U.S., was the slowest since September.

Futures ended below the frontmonth contract’s 200-day and 100-day moving averages for the first time since December. Open interest of WTI futures reached a record high on March 1 in New York.

“We have disappointing

economic news out of China,” said John Kilduff, a partner at Again Capital LLC, a New Yorkbased hedge fund that focuses on energy. He said $90 “is a critical level and we are poised to fall rather quickly down to $88.”

WTI for April delivery slid 56 cents, or 0.6 percent, to $90.12 a barrel on the New York Mercantile Exchange, the lowest settlement since Dec. 24. Prices fell to

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Publisher and executive editor James Baxter Deputy editor, news Ian Shelton Deputy editor, opinion Doug Beazley Reporters Sonya Bell | Labour and environment Eric Beauchesne | Economy Colin Horgan | Politics James Munson | Energy and mining Olesia Plokhii | Reporter BJ Siekierski | International trade Annie Bergeron-Oliver | Videographer Holly Lake | Science and health Elizabeth Thompson | Senior political reporter Michelle Zilio | Foreign affairs Columnists Lawrence Martin Michael Harris Fen Osler Hampson Peter Clark Don Lenihan Tasha KheiriddIn Alpheus Danelia Bolivar Graphic designer Jessie Willms Photographer Cynthia Munster Matthew Usherwood Web editors Laura Beaulne-Stuebing Deane McRobie Marketing and sales Sally Douglas | Vp, sales Callie Sanderson Zoe Teale John Butterfield | COO 45 O’Connor St, Suite 530, World Exchange Plaza Ottawa, Ontario, Canada, K1P 1A4 Phone: 613-216-9638 | Toll-Free: 1-877-271-9615 Who we are: iPolitics is independent, non-partisan and committed to providing timely, relevant, insightful content to those whose professional or personal interests require that they stay on top of political developments in Ottawa and the provinces.

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Conservatives, UN food envoy at it again Mike Blanchfield The Harper government is once again engaged in a war of words with a United Nations agency.

Canada can't credibly preach human rights on the international stage when too many of its own citizens are going hungry, the UN's right-to-food envoy, Olivier De Schutter, told The Canadian Press in an interview.

His comments come on the heels of a report De Schutter released Monday in Geneva at the UN Human Rights Council that cited several Canadian government policies as impediments to fighting poverty.

They include the cancellation of the long-form census in 2009, the ongoing Canada-EU free trade negotiations and the way Ottawa oversees the money it transfers to the provinces for social services.

"That is worrying because Canada, like any other country, is only credible when it preaches human rights to others if it is irreproachable itself," De Schutter said.

"I think it is in the interest of Canada itself to have an absolutely stainless reputation."

Elissa Golberg, Canada's ambassador to the UN in Geneva, fired back Monday, accusing De Schutter of unfounded criticism of Canada's Constitution and its federalist system of government.

"Canada has a number of concerns with the approach that was adopted, as well as with some of the conclusions drawn in the report," Golberg said.

"The special rapporteur has focused on some issues that exceed his mandate."

The spat renewed what has become a long-running war of words between the Harper government and the UN. The conflict has seen the government criticized by a handful of UN committees for its rights record, while Canada has staged high-profile walkouts of other UN bodies for allowing despotic countries to speak or participate.

But De Schutter said in an interview that Canada would face a further reckoning at the UN because the findings of his report would be "one major piece of evidence" in front of future UN bodies assessing the country's rights record.

Canada, he said, is a wellrespected international leader in civil and political rights, and that includes its international development aid and food aid policies.

"In order to maintain its high reputation in this area, it should do more in the area of economic and social rights," De Schutter explained.

"It is also striking that on quite a few occasions, various human rights bodies have addressed recommendations to Canada concerning social and economic rights that essentially Canada has not been following up on."

Last spring, the United Nations High Commissioner for Human Rights criticized Quebec's Bill

UN food envoy Olivier De Schutter speaks to reporters in Ottawa on Wednesday, May 16, 2012 — the first

THE CANADIAN PRESS/ Sean Kilpatrick

time he and the federal government butted heads.

78, which puts limits on the size of demonstrations and sparked major protests last year.

Ottawa fired back quickly, defending Quebec's right to pass its own laws in a democratic environment.

A few weeks later, the UN Committee Against Torture accused Ottawa of being "complicit" to human rights violations committed against three Arab-Canadian men held in Syria after 9-11.

The committee said Canadian officials played a role in the poor treatment of Omar Khadr at Guantanamo Bay, and criticized government delays in approving the child soldier's request to serve out his sentence in Canada.

Their report called on the federal government to issue an official apology to Canadians tortured by foreign jailers, including Abdullah Almalki, Ahmad El Maati and Muayyed Nureddin.

De Schutter's report said that policy decisions by the Harper government — including the cancellation of the long-form census — are undermining the fight against hunger in Canada.

De Schutter said the government needs to get a better handle on how many people are using food banks.

"They were, in principle, meant to be a very temporary fix, a temporary stop gap in the system and now they're becoming a permanent feature of the Canadian landscape," he said.

"The reality is that the responsibility of government begins by accepting to look at the reality."

His report also criticized the federal government for dismantling mechanisms that would have allowed it to ensure that the provinces spend transfers on food and housing for the disadvantaged.

"At the moment what we see is a real ping-pong game going on between different levels of government, and an ability of the local initiatives to be supported," he said.

Golberg told the committee Monday that De Schutter's report was an affront to Canadian federalism, and "demonstrated a regrettable lack of understanding with respect to Canada's constitutional

framework and the size and diversity of our nation."

"Canada is disappointed that UN mechanisms have often failed to appreciate the co-operative nature of our multi-faceted and complex system of government," she added.

"Canada does not see federalism as a problem or an excuse."

De Schutter's report urged Ottawa to create a national food strategy to fight hunger among some of Canada's most vulnerable, particularly aboriginals and people on social assistance. It calls on Ottawa to spell out the levels of responsibility between federal, provincial and municipal governments.

Health Minister Health Minister Leona Aglukkaq said Monday that De Schutter was responsible for a "one-sided biased report, written by someone who chose to ignore facts."

"Implementing the recommendations in this report would have a devastating impact on Canadians, including a $48 billion tax hike," she said.

After his visit to Canada last year, Aglukkaq called De Schutter "ill-informed" and "patronizing." Immigration Minister Jason Kenney called him "completely ridiculous."

When asked about those attacks, De Schutter said the cabinet ministers were simply playing to domestic political considerations.

"I present a mirror to the government. I look at the evidence. I go through the numbers. I listen to people. And I report to the government about what I've been seeing," he said.

"The mirror is one some people may not like to look at. But shooting the person holding the mirror is not the right answer."

Alex Neve, the head of Amnesty International Canada, said the report raises "a very real human rights issue" that the government needs to take seriously.

"That's all the more reason why it's been particularly disappointing to see how both last year, when the special rapporteur carried out his mission in Canada, and this year, we are not at all seeing a serious response from the government," Neve said from Geneva.

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THE INVESTMENT PROTECTION AGREEMENT PRIME MINISTER STEPHEN HARPER AND PRESIDENT OF THE REPUBLIC OF BENIN THOMAS BONI YAYI SHOOK ON WHEN THE AFRICAN UNION HEAD VISITED IN JANUARY IS ONE OF SEVEN SUCH AGREEMENTS CANADA HAS WITH AFRICAN COUNTRIES THAT HAVE YET TO BE BROUGHT INTO FORCE

THE CANADIAN PRESS/ Fred Chartrand

Two more African investment deals concluded — still none in force BJ Siekierski The Harper government has yet to bring a single Foreign Investment Promotion and Protection Agreement (FIPA) into force with an African country.

Trade Minister Ed Fast announced the conclusion of negotiations with Cameroon and Zambia on Monday — making the two countries the sixth and seventh with which the Harper government has concluded a FIPA. “Friends, there can be no denying the political and economic transformation that is under way

across the African continent,” Fast said in remarks prepared for a Canadian Institute of Mining, Metallurgy and Petroleum event in Toronto.

“One of the ways we’re helping our businesses expand and succeed abroad is by ensuring that Canadian investments are protected by a clear set of predictable rules.”

But are they any more protected in Africa? The Harper government concluded its first African FIPA — with Madagascar — in August 2008; since then, neither it nor any other African FIPA has proceeded beyond that handshake stage.

Agreements with Senegal, Mali, Benin and Tanzania are all still lingering, still not in force. Now there are two more.

Bringing these deals into force in Canada requires tabling the agreement in the House for 21 days, followed by cabinet approval through an Order in Council.

But there’s also the ratification process in the partner countries, about which there’s not much the Harper government can do.

Adam Taylor, Fast’s director of communications, said the Harper government is doing everything it can to expedite the process.

“As part of our commitment to protect Canadian investments abroad and our efforts to deepen our trade and investment ties throughout Africa, we'll aim to bring these treaties into force as soon as possible,” he wrote in an email to iPolitics.

The fact remains, though, that no Canadian investors are more “protected” in Africa than they were before the Harper government came to power. And there’s clearly good reason to believe the agreements with Cameroon and Zambia could take a while to change that.

According to Liberal trade critic Wayne Easter, it all adds up to a lot

of misrepresentation.

“What the Harper government is at here, it’s the same as on their various trade negotiations — it’s all about numbers,” he said.

“It’s to leave the impression that oh my golly they’re doing great and wonderful things. Look at the numbers we negotiated — x number of FIPA agreements. They won’t mention the fact that they weren’t brought into force.”

And how does Easter feel about this latest deal?

“Oh, Cameroon, my God, this is going to blow the investment community right out into outer space."

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Miners gather in Toronto as industry faces uncertainty Bernard Simon Behind the party atmosphere that pervades PDAC 2013 lies a somber reality: the global mining industry is not in a happy frame of mind.

Uncertain economic prospects in the U.S., Europe and China have kept a lid on metal prices, but costs have continued to rise. As a result, corporate profits are down and share prices have tumbled.

Shares of many small producers and exploration companies have halved in the past year, making it difficult for them to raise equity capital. Normal project finance is also hard to come by at reasonable cost.

Under growing pressure from shareholders, a procession of industry giants — most notably, BHP Billiton, Rio Tinto, Anglo American and Barrick Gold — have parted company with their chief executives.

Among smaller producers and exploration companies, disgruntled shareholders are launching proxy contests in unprecedented numbers to throw out what they see as underperforming directors and senior managers.

“PDAC is focused on the smallcap end of the market, and they are the guys who have the least access to capital today”, says George Albino, analyst at GMP Securities in Toronto. “It’s not that hard to see why the mood is so bad. A lot of things have gone very wrong.”

Among bigger companies, a series of high-profile acquisitions have turned sour, starting with Rio Tinto’s 2007 takeover of Alcan and continuing with deals such as Kinross Gold’s $8-billion purchase of Red Back Mining in 2010 and Barrick’s US$7.3-billion purchase of copper producer Equinox Minerals the following year. All three companies have taken massive writedowns.

Jamie Sokalsky, Barrick’s new CEO, told analysts last month that “rising costs, poor capital allocation and the pursuit of production growth at any cost in the industry have led to declining equity valuations across the sector. The message is clear: the industry must chart a new path forward.”

The current malaise is clear evidence that the boom-and-bust pattern that has long marked the mining industry remains intact.

Warnings during past downturns that the industry needs to change its ways have again gone unheeded.

Those warnings are surfacing again. Ivan Glasenberg, Glencore International’s chief executive and one of the most powerful men in world commodities markets, told a BMO Capital Markets conference in Florida last week: “The big guys really screwed up. We’ve always been wanting to keep building and keep putting the cash which we generate into new assets. That’s what we’ve got to stop doing as a mining

Convention goers swirl around the entrance to the Prospectors & Developers Association of

industry. We’ve got to learn about demand and supply.”

The result is that belt-tightening is now the order of the day in the form of cancelled and delayed projects, and layoffs both in the field and at head office.

Mark Ferguson, senior industry analyst at SNL Metals Economics Group, forecasts that junior mining companies will pare spending by 10 to 20 per cent this year, with exploration taking the first hit.

“A lot of them will manage to stave off death by cutting back their budgets pretty harshly”, he says. Bigger players will pull in their belts “a little bit” but not as much as the juniors, Ferguson predicts.

Cutback announcements are

iPolitics/Andrew Williamson

coming thick and fast. The latest include Toronto-based Gran Colombia Gold which said on March 1 that its focus for 2013 will be on “cost reduction and limiting capital investments”. The company aims to save US$12 million a year at its Segovia and Marmato mines in Colombia.

On the other side of the world, Anglo American Platinum, the world’s biggest producer, said in January that it would close two mines, sell another and cut 14,000 jobs.

Barrick Gold has announced that it will no longer proceed with a planned expansion at the Lumwana copper mine in Zambia it obtained as part of the Equinox acquisition. Barrick took a US$4.2-billion after-tax writedown in the fourth

quarter of last year mainly related to its copper operations. Other examples abound.

Ferguson predicts that the pain will be least felt by companies with sizeable cash reserves and highgrade deposits. Each provides a cushion against stagnant or falling metal prices.

“Those junior companies with a bit of cash are certainly in a good place from a negotiating standpoint over the next few months”, Ferguson says.

One example is Sennen Resources, a small, Vancouver-based exploration company with $13.5 million in cash and no debt, which fought off a hostile takeover bid last fall from Toronto-based Liberty Silver. Sennen, whose main asset at the time was a lackluster gold deposit in Nunavut, has subsequently used some of its cash to buy a stake in a potash project straddling the UtahColorado border.

If past cycles are any guide, the cutbacks now underway will eventually restore the equilibrium between demand and supply. The question is how the industry will react when prices start climbing again.

"When the markets do get stronger, no need to keep building a new asset and let's keep the market tight for a while," Glasenberg said.

Based on past experience however, such advice is likely to fall on deaf ears.

Canada has the biggest share of mineral exploration spending in the United States, Central and South American, Europe and Africa.

But hundreds of the projects financed in Canada experience local backlash that sometimes leads to violent clashes, costing money — sometimes lives.

As Ottawa, the industry and its critics wrestle with how best to regulate the social and political price of the world’s resource rush and Canada’s role in it, iPolitics investigates with a series on several recent controversial mine projects in Mexico, James Munson reports.

They were parked on a busy downtown street in a nearby city called Ciudad Cuauhtemoc. They were shot in broad daylight by assailants in an unknown vehicle. Ismael was waiting to pay off a debt to a farm equipment dealer; when the police found his body, his lifeless hands still clasped one hundred and fifty pesos.

No evidence exists publically linking the two elements, although Ismael’s family says police were probing possible links between the company and Ismael’s death.

MAG Silver vehemently denies any involvement in the murders. But its denial can’t untie the knot that has bound the firm to the bloodshed in the minds of the people of Benito Juarez, making it extremely unlikely MAG Silver will be welcomed back any time soon.

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Quebec resource nationalism risks scarring off investment, miners told Bernard Simon Rising resource nationalism in Quebec threatens to drive mining investment away from the province, the head of Ernst & Young’s global mining practice told the Prospectors and Developers Association of Canada’s annual convention on Monday.

Michael Elliott, based in E&Y’s offices in Sydney, Australia, expressed particular concern at the prospect of new royalties and taxes in Quebec, as well as growing political pressure by the new Parti Québécois government on mining companies to process minerals in the province.

Elliott’s views come on the heels of the Fraser Institute’s annual ranking of mining jurisdictions, published last month, which downgraded Quebec from fifth to 11th place, measured by business friendliness. The province held first place from 2007 to 2010.

Referring to the recent cancellation of a big mining project in Indonesia due to escalating government demands, Elliott warned that “the same could play out if that continues to be the policy in Quebec."

André Gaumond, chief executive of Quebec-based Virginia Mines, added that “the mining industry needs to be more proactive and to be fairly recognized among politicians and the population”.

The investment climate in Quebec contrasts markedly from the rest of Canada which Elliott described, together with Australia, as “great places for counter-cyclical investment."

He said that mining companies in Canada are better placed than those in many other countries to manage the cost of inflation that currently plagues the industry.

Mining costs in Canada are rising faster than the five to six per cent

Michael Elliott of Ernst and Young speaks about global business risks in mining and metals in the Metro Toronto Convention Centre's John Bassett Theatre, Monday.

a year global average, Elliott said, but in many cases the industry itself holds the key to cost containment.

He noted that Canada’s skills shortage is “still endemic”, despite recent cutbacks. However, companies are finding ways of boosting productivity, for instance, by moving to more capital-intensive processes, such as driverless trucks and cranes.

Costs have also been driven up by the growing complexity of mining operations, as activity moves into increasingly remote locations.

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Elliott added that divided responsibilities between the private sector and the provincial and federal governments, especially in Quebec, could complicate efforts to transport minerals from mine to port.

Quebec’s sliding image stems partly from the PQ’s platform during last year’s election campaign, which included a five per cent minimum royalty on the gross value of all mining output, as well as a 30 per cent tax on “super profits” from non-renewable resources. The previous Liberal government raised the

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basic mining tax rate from 12 per cent to 16 per cent.

The PQ has softened its tone since taking office. Marois told Bloomberg recently that “we want to raise more revenues from royalties, but we don’t want to kill the industry.”

The government has also pledged to consult the industry before implementing the increases, but Marois said that “what is unacceptable is that we have nine mining companies out of 20 that are not paying anything in royalties during

the last years.”

Gaumond also expressed concern at the growing expanse of land out of bounds to prospecti ng and exploration. The no-go area has shot up from 4.2 per cent of Quebec in 2001 to 16 per cent in 2010 and an expected 28.7 per cent in 2020, due mainly to land set aside for parks and other protected areas under the Plan Nord northern development plan.

“When you cannot explore, you cannot develop new mines”, Mr Gaumond noted.

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Regulatory layers in NWT build frustration, drive reform Bernard Simon If all goes to plan, Canadian Zinc will receive a draft permit from the Northwest Territories government next week to bring its mothballed Prairie Creek zinc, lead and silver mine in the Mackenzie Mountains back into production.

The Vancouver-based company has waited more than five years for the permit, and it will have to wait still longer before construction can proceed. Not only must the draft NWT permit be finalized, but the federal government must then approve the project. Canadian Zinc does not expect to restart production at the 30 year-old mine before 2015.

Its experience underlines the widespread unhappiness in both government and business circles that is now driving regulatory reform in the NWT and, more significantly, the drive towards devolution of powers from Ottawa to Yellowknife. Under devolution, the NWT will gain jurisdiction over mineral resources, oil and gas, and land management.

The NWT government aims to complete the devolution talks by April 1, 2014. However, Kevin Menicoche, a member of the territory’s legislative assembly and a strong supporter of devolution, told iPolitics that he doubts the target can be met.

“There’s just so much work to be done”, he says, referring, among other things, to the need to find

qualified bureaucrats in sufficient numbers willing to relocate to Yellowknife, and the work involved in setting up new NWT government departments. Roughly 150 jobs are expected to be relocated from Ottawa to Yellowknife.

Apart from the split between federal and provincial responsibilities, the mining industry has had to contend with a plethora of regulators within the territory. Five regional boards currently vet new mining and oil and gas projects.

Furthermore, jurisdiction in the most important region, the Mackenzie River Valley, is split between the Mackenzie Valley Review Board (formerly known as the Environmental Impact Review Board) and the Mackenzie Valley Land and Water Board.

The Mackenzie Valley board was the first to share authority with aboriginal groups. “Because it was the first, it wasn’t the best”, says Tom Hoefer, head of the NWT and Nunavut Chamber of Mines.

Chris Reeves, Canadian Zinc’s general manager, adds that “part of the frustration with the current system is that we’re dealing with the same questions with two different boards”.

Moves have been underway for almost five years to replace the fragmented land and water boards with a single “super-board."

However, the drive towards both regulatory reform and devolution has also been slowed by disagreements among First Nations groups,

Northwest Territories MLA Kevin Menicoche says it's unlikely devolution of powers to the territory will arrive on schedule.

and among individual bands within those groups.

Two of seven groups – the Dehcho and Akaitcho – have yet to support devolution. The federal Northern Jobs and Growth Act, known as Bill C-47, which would modernize parts of the territory's regulatory system and is considered a step towards a superboard, is currently stalled in Parliament.

The delays are frequently linked to land-claims settlement talks with Ottawa. Four aboriginal groups

have so far signed settlements, but four others are still under discussion.

Some groups with settled claims have set up their own land and water management boards, and are loath to see their authority diluted by the proposed super-board.

“When you have an unsettled claim, it’s a very politicized process”, Hoefer said. What’s more, he added, “we can be the meat in the sandwich”.

Yukon signed a devolution

a g re e me nt with Ottawa in 2001. Hoefer says that the success of that deal over the past 12 years should spur all parties in the NWT to follow in its neighbour’s footsteps as soon as possible.

Reeves echoes that view, noting that the NWT government has been very supportive to the Prairie Creek project. “They’ve been excellent to deal with. The issue is the terms of the process. Everybody recognizes that, and that’s part of the devolution process.”

Finding the gold standard in conflict mineral prevention triggers lawsuits James Munson Rival efforts to stop the flow of conflict minerals from central Africa are duelling for supremacy in the gold industry.

At issue is just how precise controls to certify bullion as conflictfree can be, given the prevalence of recycled gold in the global market.

"It's the world's most recycled metal," said Terry Heymann, director of responsible gold at the World Gold Council, which represents the twenty-three biggest gold producers globally.

On Sunday, the Prospectors and Developers Association of Canada (PDAC) conference held a workshop on the status of several conflict mineral monitoring issue, a critical issue for the mining industry for the past decade and a half after wars in Sierra Leone and sub-Saharan Africa brought the link between resources and violence to light.

Only 2,500 tons of gold is produced annually, a small amount to monitor.

But because gold is kept by individuals as both a precious item and as currency, smelters and refiners live with a multitude of intakes that are difficult to track, said Haymann.

"Asking people to understand who has handled their gold before its got to them and know everybody that's been involved along the way is very much like looking at a $10 note, and every time you receive a $10 note, you have to know everybody who has touched that $10 note before it has got to you," said Heymann.

Around 40 per cent of the world's gold comes from recycled sources.

Putting requirements on manufacturers to source their gold is even more difficult, given how far they are from the metal's source.

"That gold goes through very many supplies," said Heymann.

"Gold has very different supply chain characteristics."

The U.S. government disagrees.

Last summer, the Securities and Exchange Commission (SEC) released new rules that would force mineral producers working inside or around the Democratic Republic of Congo (DRC) — which has suffered from both civil war and violent unrest for the past seventeen years — to disclose whether or not their product could be profiting militias.

The rule, known as Amendment

1502, would only impact gold, wolframite, cassiterite and coltan miners. Tin is derived from cassiterite and tungsten from wolframite.

Amendment 1502 would also require manufacturers who source from the DRC region to perform some measure of due diligence and see if they can determine whether the minerals fuel conflict. The results will be filed in a new disclosure document.

The rule was suppose to go into effect in the next year, but the U.S. National Association of Manufacturers, the U.S. Chamber of Commerce and the Business Roundtable have sued the SEC over the rule.

With that rule stalled, the World Gold Council would like the ambitious goal of trying to get companies to be certain of their sourcing replaced with rules that put a premium on a company's efforts to monitor their product's origins.

The council's "Conflict-Free Gold Standard," launched last October, will require members to abide by a certain degree of internal oversight regarding their product's source.

They'll have to publish information showing: they've assessed local conflicts, their operations'

vulnerability to fuelling those conflicts, and their own controls to keep conflict minerals out of their production.

Ironically, both initiatives borrow in some form the work done by the OECD on due diligence standards for conflict minerals in supply chains, published in May 2011.

But manufacturers are not directly affected by the World Gold Council's standard, while Amendment 1502 forces upstream metal users to comply.

Another chief difference is the way the information on conflict minerals will be published.

In Amendment 1502, companies will file a conflict mineral report that the World Gold Council says will leave them exposed to allegations of fuelling conflict because they couldn't conclusively determine their product's source.

The standard, on the other hand, would only force the publication of information regarding the company's ability to do its own oversight.

When the SEC solicited opinions on Amendment 1502, the council expressed worry that the geographical nature of the rule would unfairly stigmatized gold producing-countries working in

DRC-neighbour countries, most notably Tanzania.

It worried the drop in gold production would lead to the metal being replaced by copper in electronics and platinum in jewellery.

An amicus brief was filed by former Ambassador Jendayi Frazer, who served as assistant secretary of state for African Affairs from 2005 to 2009, that called Amendment 1502 into question because of the economic impact it will have on artisinal miners and miners in the legitimate gold industry in the region around the DRC. Other efforts to quell the trade in conflict minerals, which have both influenced and are influenced by the World Gold Council and U.S. government's initiatives, include Public-Private Alliance for Responsible Minerals Trade and the International Conference of the Great Lakes Region's regional certification scheme.

The World Gold Council stopped short of endorsing the lawsuit against Amendment 1502.

"We recognize some of the concerns that have been voiced around section 1502," said Heymann. "We'll wait and see what the results will be."

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FEATURED OPINION

It's a trans-Atlantic fiscal circus — complete with clowns Fen Osler Hampson There is a perfect storm brewing on both sides of the Atlantic, in Rome and in Washington. When these two political frontal systems converge, the ensuing hurricane could wreak more economic destruction — not just in Europe and the U.S., but in Canada.

Italy's election produced gridlock in Europe's third-largest and most indebted economy. Unless its political class stops clowning around, the modest but still important gains that interim president Mario Monti secured to cut Italy's spending and raise taxes will have been for nought.

Investors and financial markets are already spooked. The euro has taken a sharp nosedive.

There is talk that Italy could take the euro down entirely if there is no resolution of the current crisis — either through the formation of an unlikely pact involving Silvio Berlusconi, whose right-wing coalition came in a surprisingly close second to Pier Luigi Bersani's left-centre alliance, or through new elections which hand one of Italy's parties a clear victory. The odds are stacked against both possibilities.

France and Britain are also in trouble. Francois Hollande's government has foolishly taken a run at the very private investors he needs to boost France's sagging economic fortunes by raising corporate and personal income taxes, especially on the richest. France is still far too reliant on the public sector for employment and growth. Government spending is more than half the size of France's GDP. Britain has the opposite problem: excessive penury. Many economists argue that Prime Minister David Cameron's spending cuts have been far too draconian, given the fragile state of Britain's economic health. Britain is now caught in a downward spiral of deficit reduction and shrinking growth unless Cameron takes his foot off the brakes and pushes down hard on the fiscal accelerator — something that he and Chancellor of the Exchequer George Osborne are loath to do.

Even Germany, which has long been Europe's economic motor, is stalled as demand for its goods in key export markets — 60 per cent of which are in the eurozone area — undergoes sharp decline.

German politics is also entering an area of turbulence, with federal elections set for September. Although Chancellor Angela Merkel is miles ahead of her Socialist opponent in terms of personal popularity, her coalition partner in the Bundestaat, the FDP, is in real trouble.

Merkel could well lose the next federal election to the Socialists and the Greens unless her own party, the Christian Democrats, can make up the shortfall in voters' affections.

Last week's sequestration antics in Washington and the drastic fiscal cuts that went into effect on Saturday are proof that you don't need to be Italian to be a clown.

America's decline has long been the

There is talk that Italy could take the euro down entirely if there is no resolution of the current crisis. topic of discussion in the world's capitals. If you needed any proof, it came in abundance last week with the stunning lack of leadership displayed over the sequestration debate. The damage was done this time not just by mean-spirited Republicans but by a less-than-magnanimous president who demonstrated once again that he is neither a Lincoln nor a Johnson when it comes to the art of political dealmaking.

Perhaps America's political classes need time off to come to their senses. But with so much heated rhetoric and fingerpointing by all sides, don't expect a budget deal soon.

Americans are about to enter the worst of all possible worlds: drastic cuts to defence and other discretionary items (like foreign aid and education) that keep America strong, and no real cuts to entitlement programs — the big-ticket items where cuts are needed most.

Continuing economic malaise across the Atlantic will be compounded by the looming crisis south of our border. It's a double-whammy blow to the global economy, caused by European and American acts of political self-immolation — just when we thought we were getting out of the woods.

Canada is going to take a hit from these colliding storms. Not only will this country's trade and investment suffer if Europe falters yet again — a receding tide lowers all boats — but unless we can clinch a free trade deal with the Europeans soon we may be forced to throw in the towel. The clock is running out and the deal's biggest booster in Europe, Angela Merkel, is now entering a real fight for her own re-election.

The much-hyped Beyond the Border deal with Washington may also be a casualty of the sequestration war between the White House and Congress. In short order, we may see fewer U.S. customs and immigration officials at the border, longer lineups, more delays and ever-worsening congestion at key transit points.

Our pleas for special treatment as America's largest trading partner will be drowned out by the noisy crescendo of Washington's ugly partisan wars. Getting the White House's support and undivided attention may well be an exercise in futility.

Fen Osler Hampson is a distinguished Fellow and director of Global Security at the Centre for International Governance Innovation. He is also Chancellor’s Professor at Carleton University. He is the author of nine books and editor/co-editor of more than 25 other volumes on international affairs and Canadian foreign policy.

Why both sides are wrong in the debate over telecommuting Bloomberg View This editorial was produced in an office, so it may be 13 percent less productive and efficient at its job than if it were written at home.

Then again, if it were produced at home, away from the boss’s gaze, it might still be goofing off, collecting glib phrases and sentence fragments without cohering into anything persuasive.

In the latest debate over telecommuting, sparked by Yahoo!

Inc. (YHOO)’s announcementthat all employees working from home must start showing up at the office, the two camps have staked out their positions. Advocates of working from home cite studies showing that telecommuting benefits employers and employees alike. Opponents extol the benefits that can come only from a spontaneous, collaborative work environment.

Two subtleties undermine each of these views. First, little about telecommuting’s value can be deduced from the current body of research on the subject. Second, Yahoo’s experience with home-bound workers says a lot about Yahoo’s experience with home-bound workers. About the only generalized lesson we can draw is that managing employees well is vital, whether they work in a cramped cubicle or the spare bedroom.

Yahoo insiders say it had become a common view that the company was bogged down with slackers taking advantage of workfrom-home arrangements. So Chief Executive Officer Marissa Mayer, hired in July to turn the troubled company around, apparently decided to test that theory by checking how many remote employees were logging into the company’s network, allowing them secure access to Yahoo’s systems.

The answer: too few.

Measuring Productivity How to reconcile Yahoo’s experience with studies showing people are more productive when they work from home?

Most of these reports aren’t studies in any scientific sense. Many are surveys in which employees who work from home self-report on factors such as their productivity and job satisfaction. As such they are vulnerable to the Hawthorne effect, in which subjects change their behavior in response to an experiment. Respondents may overestimate their work output, hoping an employer will permanently adopt telecommuting. In any case, employees are generally poor judges of their productivity.

In addition, even if remote employees produce more in the hours they work at home, there may be related productivity losses back at the office. What about those brainstorming sessions by the water cooler? More prosaically, and realistically, there are the hours spent by colleagues at the office on material to send home and on troubleshooting technology glitches.

Then there are the case studies purporting to show that telecommuting saves money by increasing productivity and retention and by cutting overhead, because companies need less office space. Cisco Systems Inc., for example, claims that telecommuting saved it $277 million a year. Of course, its business is selling communications equipment that enables employees to work remotely. It’s a little like Coca-Cola promoting the virtues of soda sales in schools.

What could help clarify this issue, beyond a healthy dose of common sense, is a randomized trial in which one group within a company works remotely and the other goes to the office. So far, just one such study has been conducted. It is fascinating and has been widely referenced in the current debate, but it

has almost nothing to do with the challenges facing Yahoo.

Over nine months, call-center employees for the Chinese travel company CTrip who worked at home proved 13 percent more productive than a control group, based on the objective measure of the number of phone calls they made.

The group’s attrition rate, 17 percent, was half that of the control group. CTrip estimated annual savings of $2,000 per telecommuting employee.

Strong Incentives What no one mentions, however, is that half of a CTrip employee’s monthly earnings is based on his or her call and order volume. Thus workers had a strong incentive to be especially industrious, and working from home helped: It was quieter than the office, so employees got through calls faster and thus made more of them.

They worked more minutes within a mandated shift because, spared a commute, they were less tardy. And they had fewer sick days because they worked even if a little unwell.

For companies such as Yahoo, where output for salaried employees is hard to measure and synergy among at least some workers is vital, the CTrip experience can’t be replicated. Still, for them, telecommuting is not a bad idea per se. It can help attract and retain talent. And it’s well suited for quiet, independent tasks that even collaborative workers do occasionally. The challenge is to establish the right mix between office and remote work and to ensure work from home is productive. That means having managers establish expectations and communicate regularly with their charges.

This was the lapse at Yahoo. It was a failure of management, not telecommuting. That’s why, both inside and outside the company, it’s expected that once the shirkers have been weeded out, working from home will return to Yahoo.

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FEATURED OPINION

How the U.S. slept through China's rise Kishore Mahbubani, Foreign Policy SINGAPORE - Since the dawn of geopolitics, there has always been tension between the world's greatest power and the world's greatest emerging power. No great power likes to cede its No. 1 spot. One of the few times the top power ceded its position to the No. 2 power peacefully was when Great Britain allowed the United States to surge ahead in the late 19th century.

Many books have been written on why this transition happened peacefully. But the basic reason seems cultural: One Anglo-Saxon power was giving way to another.

Today, the situation is different. The No. 1 power is the United States, the standard-bearer of the West. The No. 2 power rapidly catching up is China, an Asian power. If China passes America in the next decade or two, it will be the first time in two centuries that a non-Western power has emerged as No. 1. (According to economic historian Angus Maddison's calculations, China was the world's No. 1 economy until 1890.)

The logic of history tells us that such power transitions do not happen peacefully. Indeed, we should expect to see a rising level of tension as America worries more and more about losing its primacy. Yet it has done little to act on these fears thus far. It would have been quite natural for America to carry out various moves to thwart China's rise.

That's what great powers have done throughout history. That's how America faced the Soviet Union.

So why isn't this happening?

Why are we seeing an unnatural

degree of geopolitical calm between the world's greatest power and the world's greatest emerging power?

It would be virtually impossible to get Beijing and Washington to agree on the answers to these natural questions, as there are two distinct and sometimes competing narratives in the two capitals.

The view in Beijing is that the calm in Sino-American relations is a result of the extraordinary patience and forbearance shown by China. Chinese leaders believe they have followed the wise advice of Deng Xiaoping, the late reformist leader, and decided not to challenge American leadership in any way or in any area. And when China has felt that it was directly provoked, it has also followed Deng's advice and swallowed its humiliation.

Few Americans remember any such instances of provocation.

Chinese leaders remember many.

In May 1999, during the NATO bombing of Yugoslavia, a U.S. plane bombed the Chinese Embassy in Belgrade. America apologized, but no Chinese leader believed it was a mistake. Similarly, a Chinese fighter jet was downed when it crashed into a U.S. spy plane near Hainan Island, China, in April 2001. Here, too, China felt humiliated. Few Americans will recall the humiliation Premier Zhu Rongji suffered in April 1999 when he went to Washington to negotiate China's entry into the World Trade Organization (WTO); Chinese elites haven't forgotten. In their minds, China has been responsible for the low levels of tension in U.S.-China relations because China has swallowed such bitter pills time and again.

The view in Washington is almost exactly the opposite. Few

Americans believe that China has been able to rise peacefully because of China's geopolitical acumen or America's geopolitical mistakes.

Instead, the prevailing view is that America has been remarkably generous to China and allowed it to emerge peacefully because the United States is an inherently virtuous and generous country.

There can be no denying that the United States has been generous to China in many real ways: allowing China's accession to the WTO (under stiff conditions, it must be emphasized, but stiff conditions that ironically benefited China); allowing China to enjoy massive trade surpluses; allowing China to join multilateral bodies like the Asia-Pacific Economic Cooperation forum; and perhaps most importantly of all, allowing hundreds of thousands of Chinese students to study in American universities.

These are generous acts.

But it is also true that the United States allowed China to rise because it was so supremely self-confident that it would always remain on top.

China's benign rise was a result of American neglect, not a result of any long-term strategy. China acted strategically; America did not. After the 9/11 attacks, for instance, the United States focused on the Middle East instead of the rise of China, leading Hong Kong journalist Frank Ching to write, "The fact is, it's not going too far to say that China owes a huge debt of gratitude to Osama bin Laden."

America has been sensitive to criticisms about its lack of a longterm strategy. I can speak about this from personal experience. In February 2009, Hillary Clinton visited China on her first overseas visit

as U.S. secretary of state. I wrote at the time: There's little evidence Clinton has engaged in any serious strategic thinking about U.S.-China relations. If she had, she would have asked some big questions. Traditionally, relations between dominant powers and emerging powers have been tense. This should have been the norm with China and the United States. Yet China has emerged without alarming Americans. That's close to a geopolitical miracle. Who deserves credit for it? Beijing or Washington? China seems to have a clear, comprehensive strategy. The United States has none.

Officials in Washington reacted angrily to this column. A senior official at the National Security Council called up the Singaporean Embassy in Washington to complain about a Singaporean criticizing U.S. foreign policy — even though, in theory, America welcomes debate and a free marketplace of ideas.

I also tell this story to illustrate how sensitive the establishment in Washington has become to any discussion on the nature of Sino-American relations. The truth about this relationship is that, while there is a lot of calm on the surface, tension is brewing below. I am convinced that there is great simmering anger in Beijing about being pushed around callously by Washington.

The Chinese resent, for instance, allegations of Chinese cyberspying that make no mention of America's own activities in this area. The Chinese do not believe that they are the only ones playing this game.

Given the many simmering tensions, it would be unwise to assume smooth sailing ahead for the

The logic of history tells us that such power transitions do not happen peacefully.

Indeed, we should expect to see a rising level of tension as America worries more and more about losing its primacy. So why isn't this happening?

United States and China. The need to cooperate is rising each day, as is the potential for a major U.S.-China misunderstanding.

In November 2011, then-Secretary Clinton announced loudly and boldly a "pivot" to Asia, signifying a turning point in U.S. foreign policy that would reduce the focus on the Middle East. Barack Obama's administration took pains to avoid saying that this was America's response to a rising China, but nobody, including China, was fooled.

Other countries saw it as a clear signal that Sino-American geopolitical competition was heating up.

The logical consequence is therefore not difficult to figure out: We should be prepared for global turbulence if the U.S.-China relationship follows the millennial old patterns and no longer remains on an even keel.

Kishore Mahbubani is dean of the Lee Kuan Yew School of Public Policy at the National University of Singapore and author most recently of The Great Convergence, from which this excerpt was adapted.

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the world that the future of mining and the trade in metals and minerals is being decided. Not Canada.

Canadian mining companies operating abroad, and mining companies in Canada that produce metals and minerals for global markets, are engaged through trade and investment more actively with the global economy than any other sector in Canada, and arguably, the world. Canadian mining companies operate in every corner of the globe. Whether at home or abroad, these companies are supplying the metals and minerals the world needs — copper, nickel, uranium, cobalt, potash, zinc – and also what the world wants — gold, diamonds, platinum.

The strength and diversity of Canadian mining is a result of the variety and abundance of the resources first found across Canada. Canadian mining is adept at finding, proving, financing, developing, operating and rehabilitating mines of all sizes and types. This gives Canadian based mining a competitive advantage over the rest of the world, especially when it comes to attracting capital and bringing a project to life. But as good as it is at home, it is in the rest of

For Canadian mining to secure its competitive advantage abroad there are several steps that require immediate attention. First, those companies operating abroad need to engage directly at the global level of official and quasi-official rule-making bodies. The debate over transfer pricing, export restrictions, traceability of conflict minerals, and the drive for greater financial transparency and accountability of mining companies operating in the developing world is occurring in Geneva, Paris, Brussels, and Washington.

Canadian mining companies have to be as effective in these political decision making centres as they are at raising money in the City, on Wall Street, and at King and Bay. The best way to do this is to build on the work the Canadian Chamber of Commerce, MAC, PDAC, and the CEUMC are already doing on the international stage. What’s needed, though, is better coordination amongst these groups in support of a common message, especially about the contribution Canadian mining companies make in the economies where they operate. Using their combined skills, networks, and experience in pursuit of a common goal, but at the global level, these organizations can help shape the global rules for the benefit of all Canadian mining activities.

The second step is for Canadian mining companies to leverage its active participation in international sector specific industry organizations. Canadian mining companies are leaders in The Nickel Institute, World Gold Council, and the ICMM. Yet, as effective as they are, they lack the one thing that can make a difference with the international

decision making bodies and governments they are trying to influence: a flag.

Without clear support from a country, these organizations can just as easily find themselves on the outside looking in when decision of critical importance are being made. Decisions affecting the global trade and investment in mining, metals and minerals sector are being made every day at the EU, UN, G8, G20, WTO, IMF, and World Bank. Companies, no matter how big or extensive their global footprint, do not have a seat at the table. Only countries. And the one country that actively defends mining interests both at home and abroad is Canada.

Which gives rise to the third step Canadian mining companies operating abroad should take. Simply put, embrace the Maple Leaf and work more closely with the Canadian government on issues of common cause on the international stage. Canada already supports Canadian international mining activity through the financial tools of EDC, and signing FIPAs with resource-rich countries. But to draw upon the full range of political, diplomatic, policy and development tools available from Canada, Canadian mining needs to do more.

A good place to start would be actively supporting the Intergovernmental Forum on Mining, Metals, Minerals and Sustainable Development. The IGF’s 45 member governments from Africa, South and Central America, and Central Asia are focussed on improving governance, financial accountability, and addressing the societal and environmental impact caused mining. The driving force behind the IGF is the Canadian government, namely CIDA and NRCan. By supporting the IGF, Canadian mining can forge a stronger partnership with the

Canadian government while improving the conditions in the very resource-rich countries where they are or wish to operate. It is a win-win-win proposition that is uniquely Canadian in its aims and the methods to achieve it.

Canadian mining has proven a proven track record of success in Canada and elsewhere. The task now is to turn this track record of success into a lasting global competitive advantage inside and outside our borders. It starts with engaging directly with the international bodies on issues of importance to those companies operating abroad, recognizing the strengths and limits of the current approach Canadian mining has taken when it engages internationally, and building a stronger and a more strategic partnership with the Canadian government.

Taken together, these steps will set Canadian mining on an international path to success that that will benefit all Canadians for years to come.

James M. Small, Executive Director, CanadaEU Mining Council. The CEUMC was established in 2009 to advance and promote the trade and investment interests of Canadian mining companies at the EU. In addition, it actively supports the Canada-EU Comprehensive Economic & Trade Agreement negotiations, and promotes the contribution Canadian mining can and does make to sustainable development in resource rich developing countries, primarily in Africa. Please visit our website at www.ceumc.com.

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Quebec's green lobby girding for a fight on Plan Nord II Continued on pg. 1 determining the development of public lands in northern Ontario. But the Act has come under fire both from aboriginal groups and the opposition Progressive Conservatives. The latter claim it creates uncertainty for investors and promise to scrap it if elected. The province currently ranks sixteenth among the world’s mining destinations, according to the latest Fraser Institute Report on the subject, but would rank eighth were it not for land restrictions in the Act. iPolitics asked Ontario Minister of Natural Resources Michael Gravelle whether the Act impedes development. “I truly don’t agree," he said.

"While I recognize that a number of First Nations and certainly a number of Chamber organizations have expressed some concerns about it, we have also seen significant progress made on a piece of legislation that is actually unprecedented, in that it actually partners for the first time with First Nations in the northern part of the province to give them decisionmaking power on how their lands are used, whether for regional development purposes or protected cultural purposes. That’s never happened before.”

Meanwhile, in Quebec, the green lobby is girding for a fight on the PQ government’s take on the previous Liberal administration’s Plan Nord, which seeks to develop northern mineral resources. In an interview with iPolitics Sunday night, Ouellette indicated that the PQ is consulting for 45 days on a new set of environmental regulations, which already

has attracted the “voluntary adherence” of two companies, Osisco and Tata, “even before we introduced it.

When there is a better environmental protection, there is more confidence among citizens. The mines that come from Quebec, they know the environment of Quebec but those from international owners do not necessarily know.”

The rules also would ensure that communities share in the economic benefits of mining, including the use of local expertise, manpower and processing of raw materials. In Ouellette’s words, “wherever possible we want to do processing in Quebec.”

That approach is shared by the NDP in Ontario, who are demanding that the Liberal government ensure the processing of raw materials in the province. The NDP has a big beef with Cliffs Natural Resources, which is reportedly planning to export fifty per cent of the chromite extracted in the Ring of Fire for processing in China. When asked whether the government would take steps to ensure domestic processing, Gravelle told iPolitics that “we want to see the greatest value added benefit from the mining sector in the province”, adding that Cliffs had made a $3.3 billion dollar investment proposal that included a domestic processing facility.

But forcing companies to process locally could hurt the industry. According to Chris Hodgson, president of the Ontario Mining Association, “it’s OK as long as nobody else does it in the world. Our whole steel industry in Hamilton is imported material. What usually happens is other provinces start to retaliate and that

Ontario and Quebec — both 'have-not' provinces — are grappling with the decline in their manufacturing sectors.

Resource extraction could provide the ticket to prosperity for all — but it comes with a host of challenges. would be a net loss of a lot of jobs in Ontario.”

The PQ’s protectionist approach concerns the industry in Quebec as well. But even more worrisome has been the lack of consistency in the government’s statements on resource development. According to Michel Kelly Gagnon, president of the Montreal Economic Institute, “in an industry involving long-term investment, where companies don’t get a return for ten or twenty years, to create confusion about the regime is about the worst thing you can do.”

Kelly-Gagnon cited the example of a mining company in Rouyn Noranda which saw its foreign investors back out of a signed memorandum of understanding following the election of the PQ government and “not even

The New Gold

Standard:

Resources minister Joe Oliver Ottawa is keep-

Bloomberg/

ing a close eye on development in Ontario and

Norm Betts

Quebec, for different reasons.

policies, but musings of policies.”

Ottawa is keeping a close eye on development in both provinces, for different reasons. The Ring of Fire represents a potential economic bonanza of $30 to $50 billion in minerals. Ottawa had the sense, though, that McGuinty wasn’t taking the file seriously enough — or, in the blunter words of one industry watcher (who will remain anonymous), “screwed it up.” Hence Ottawa’s appointment of Clement, who was equally blunt in his remarks to PDAC Sunday night: “There is a lot at stake and we cannot afford to allow this development to stall and become mired in paralysis and uncertainty. We can’t let this opportunity pass us by.”

Meanwhile, Quebec’s development agenda represents a potential boost to the province’s economy — and to the sovereignty movement. A

minority PQ government can only do so much, but should the party win a majority in the next election, widely expected to be held within a year, mining will be as hot as hydroelectricity was in the 1970s, politically speaking.

So will northern development prove to be a gold mine — or a minefield? For politicians in Ontario, Quebec and Ottawa, the stakes are sky-high, and the issues won’t be resolved any time soon. In an uncertain business, though, one prospect is sure: PDAC 2014 will be as politically charged as this year’s version. tjk@tashakheiriddin.com Tasha Kheiriddin is a wellknown political writer and broadcaster who frequently comments in both English and French. Her regular columns appear at iPolitics.ca Tuesdays and Friday mornings.

As investor, government and Aboriginal relations become more challenging, natural resource developers are recognizing the need to have strategic communications counsel at the table.

Find out why so many are calling on NATIONAL Public Relations to get the right story out and the most important projects approved.

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TUESDAY, MARCH, 5, 2013

Engage China or fall Read this story, bond with your country behind, Harder warns Elizabeth Thompson

Olesia Plokhii Despite a $15-billion oil deal that made Canada China’s number one foreign investment market last year, Canada will need to pursue a more aggressive pivot toward China if it wants to benefit from a global economy redefined by the emerging giant.

“Inertia will not serve us as well as deliberate engagement,” said Peter Harder, a former top-level civil servant who now heads the Canada China Business Council. “If we don’t get onto the reality of this changing economic relationship… we threaten our way of life.”

On his landmark trip to Beijing last February, Prime Minister Stephen Harper rolled out a red carpet for Canada’s economic relationship with China.

He announced an arbitration agreement that will safeguard Canadian companies in China and unveiled a $1-billion natural resource fund. Less than one year later, he approved the biggest Chinese foreign acquisition to date.

But true to the somewhat schizophrenic nature of Ottawa’s relationship with China, even as Harper allowed one deal, he announced rules limiting similar takeovers involving state owned firms. Meanwhile, the Foreign Investment Promotion and Protection Agreement with China is mired in a political backlash and free trade talks have never been even been formally considered.

“Now is the time (for engagement),” Harder said. “Or we will be disadvantaged.”

Harder’s message of a “sustained” bilateral relationship with China is being echoed across the country by advocates calling for Ottawa to pursue a pro-China policy that puts Canada on China’s permanent radar.

They are urging Canada to diversify away from the U.S., and engage China not only economically, but culturally.

They want to begin discussions on free trade with China, and say they want a national dialogue on dealing with China, a topic that has divided Canadians.

“The single biggest problem we face

is domestic receptivity and political will to forge a closer relationship (with China),” said Yuen Pau Woo, president of the Asia Pacific Foundation in Vancouver.

Last year, China overtook Britain as Canada’s second biggest export market, with $19.3 billion in shipped goods.

CNOOC’s $15.1-billion takeover of Calgary’s Nexen was the biggest Chinese foreign takeover to date, and China’s brought in $10.9 billion of foreign direct investment to Canada in 2011.

Still, Harder said, Canada needs to show a persistent policy of bilateral engagement with China if it wants to reap benefits from an economic powerhouse being courted from all corners of the world.

“The world is beating a path to China,” he said of the behemoth economy, which is set to eclipse U.S. GDP as soon as 2017. “We have to understand that this is not an episode, this is not a year, this is not a decade, this is a very significant and permanent restructuring.”

Canada’s ambivalence about China is not unique. China’s economic rise and the resulting geopolitical power it has amassed have given its trade partners reasons to pause.

In a 2012 report to Congress, a U.S. government group focused on China called Chinese actors "the world’s most active and persistent perpetrators of economic espionage.”

While Harder admitted espionage was a serious issue, he said Canada should not be “naïve nor should we be paranoid,” as a result, adding that institutions like the WTO existed to resolve disputes between countries.

Eliminating long standing export restrictions on logs — mostly bound for China, encouraging small and medium sized Canadian enterprises to do business there, and facilitating cross-cultural ties like university partnerships were good first steps to foster strong ties with Beijing, he said.

"It's in our interest as Canada," Harder said.

Those who follow reporting about Canadian politics have a stronger attachment to Canada than those who rarely or never follow Canadian political news, according to a new survey.

The survey, conducted for the Association for Canadian Studies, also found that the more both anglophones and francophones follow news about Canadian politics, the more likely they are to prefer federalism.

“It shows there is a relationship between the type of things people read about Canada or the interest in reading about Canada’s politics and the extent to which people are attached to the country,” said Jack Jedwab, executive director of the association. “I think policy makers who are looking for ways to strengthen attachment to Canada may think about encouraging more people to read news about Canada.”

The poll, conducted by Léger Marketing, found that 85.1 per cent of English-speaking respondents who said they “often” follow news about Canadian politics felt very attached to Canada. That attachment to Canada dropped to 65.6 per cent among those who said they never

follow Canadian political news.

While the poll found a lower level of attachment among francophones there was once again a wide gap between those whose follow the news and who don’t. The poll found that 41.6 per cent of francophones who often follow Canadian politics felt very attached to Canada compared with only 10.5 per cent of those who never followed political news.

Among allophones, whose first language is neither English nor French, 81.8 per cent of those who often follow political news said they were very attached to Canada who while the rate was 33.3 per cent among respondents who never followed the news.

“I think those who are attached to Canada will probably read more and those people who read more about Canadian politics probably will see some growth in their attachment to Canada,” said Jedwab.

The more people read, the less they responded “I don’t know” when asked about their attachment to Canada, he added.

“The more you read about politics, the more you form an opinion, the more you develop some kind of identification with Canada, hence I think that identification translates

into more identification – not less.”

Although Quebec elected a sovereignist Parti Québécois government last fall, the survey found that 71.7 per cent of francophones who often follow news about Canadian politics preferred federalist governance. At the other end of the spectrum, only 28.6 per cent of francophones who never followed news about Canadian politics in Quebec, favoured federalism.

Those who follow news about politics also had a better knowledge of how the federal government works.

If the government wants to do more to increase attachment to Canada – particularly among young Canadians, it should find ways to make the debate more interesting and to encourage more people to read about politics, said Jedwab.

“They can use social media to get Canadians more engaged in the dialogue and discussion and debate about Canada. Clearly they need to target younger people in that regard.

There’s also a strong indication in the poll that younger people are the ones who are not following the news about politics, in general, as much as older people are… It’s sort something that grows with age, like a fine wine.”

Several firms under investigation Continued on pg. 1 seminar panelists.

A notable difference will be that in the U.S. the charges fall under civil court, while in Canada corruption breaches are criminal.

But with finer laws come more precise definitions of corruption, a trend that mining companies are having a hard time keeping up with.

During the seminar, people inside the industry voiced questions about what exactly could be considered a bribe under the world's leading corruption laws.

"I was working on a project in Panama and there was a regional election of indigenous leaders," said a woman in the audience. "And we were asked to provide transport for supporters of one leader."

"We did it because it sounded right," she said. "But how would these acts apply in that kind of situation?"

Drimmer replied that such a situation would fall under bribery laws because political parties are considered a part of government, as long as the indigenous governments in question had some kind of

discretionary power to make laws.

The RCMP are currently investigating several Canadian mining firms for corruption, including Blackfire Exploration and Griffiths Energy International Inc. In 2011, Niko Resources Ltd. entered a plea deal after being charged under the CFPOA. Baird's amendments — wrapped up under Bill S-14 , An Act to Amend the Corruption of Foreign Officials Act — is currently at second reading in the Senate, where it was introduced on Feb. 5.

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