Critical report of the Auditor General of Quebec on mining

Published by MAC on 2009-04-14

The Auditor General presents the results of a value-for-money audit dealing with government interventions in the mining sector

Quebec Auditor General Press release no. 2

Québec – Mr. Renaud Lachance today made public Volume II of the Report of the Auditor General of Québec to the National Assembly for 2008-2009.

Chapter 2 presents the results of a value-for-money audit dealing with government interventions in the mining sector. This press release presents an excerpt from the highlights of the report.

The Ministère des Ressources naturelles et de la Faune (MRNF) was supposed to prepare a first government strategy for the mining sector before the end of 2007. Such a strategy had not yet been made public at the time we completed our work. Based on what we have observed in its operating procedure, we have concerns about the MRNF’s ability to consider, in this mineral strategy, the main economic, social and environmental stakes. Our findings notably include the following:

• The fiscal and economic analyses produced by the MRNF do not allow it to estimate the extent to which Québec obtains sufficient compensation in return for the mining of its natural resources.

• In recent years, the MRNF stopped making a systematic statistical analysis and publishing various information on this industry.

• Although one of the components of the MRNF’s mission relates to the conservation of resources, it has not set objectives for acquiring knowledge on this subject.

The interventions seeking to ensure that mining companies comply with legal requirements during the various stages of a mine’s life do not minimize the risk that the State may have to assume additional restoration costs. Based on the analysis of a sample of 25 mining site files, we noted the following main elements:

• For close to half of the files examined, the stipulated deadlines were not met concerning the tabling or the revision of the plan. The average time period between the tabling of the plan and its approval was approximately three years.

• In approximately ten files, the plans were approved despite a notice of the Ministère du Développement durable, de l’Environnement et des Parcs (MDDEP) that was inconclusive, unfavourable or that specified conditions, or in the absence of a notice.

• The financial guarantee, which is supposed to cover 70 percent of the estimated restoration costs, has its limits given the conditions for establishing and paying the sums. To illustrate this point, the applicable guarantee in the audited files stood at $109 million, while the total cost of the restoration work for all of these sites was established at $352 million on March 31, 2007.

• The guarantee payments have not always corresponded to the calendar established by the MRNF, with the delays occasionally exceeding two years. In some cases, the payments had just simply not been made.

• The payment requirements determined by the MRNF for some files did not comply with the regulation, resulting in the postponement of $16 million in payments.

• There was a serious lack of organization in the inspection activities. We were unable to find any report concerning such activities in more than half of the audited files. For the other files, the inspections had been carried out without an analysis grid and occasionally dated back more than two years.

• In almost all of the files, we found no trace of cooperation between the inspectors from the MRNF and those from the MDDEP, which would promote the coherency, effectiveness and efficiency of inspection activities.

• The information recorded in the MRNF’s mining-site files did not provide a complete overview of the interventions made. We also noted a lack of management information and tools likely to help the Department collect data on the evolution of the situation of all of the mining sites.

The Highlights are available on the web site of the Auditor General of Québec at the following address: http://www.vgq.qc.ca, (english home page) or under the “Annual Reports- Highlights” tab of the “Publications” section. The full report is available on the french home page.

Source: Raymonde Côté-Tremblay, Office of the Auditor General Tel.: 418 691-5926

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Report of the Auditor General of Quebec on mining – Amir Khadir wants to put an end to the pillage. Louis-Gilles Francoeur, Le Devoir, http://www.ledevoir.com/2009/04/03/243518.html

3 April 2009

(Translation by Ramsey Hart, MiningWatch Canada)

A majority of mining companies didn’t paid any royalties in 2007-2008. The revelations of the Auditor General of Quebec regarding the loss of control of the mining sector, released yesterday, incited environmentalists and Quebec Solidaire deputy, Amir Khadir, to demand a reform to mining policies. They say reforms are needed to end the privileges, exemptions, lax regulatory climate and abuses documented in the report.

The Minister of Natural Resources and Wildlife, Serge Simard, rebutted the attacks of the opposition, repeating that Quebec intends to maintain its status as a “mining paradise” favoured by industry.

Mr. Khadir commented that “in recent years, the mining industry has extracted no less than $17-billion in gold and metals from beneath Quebec soil. These companies have only paid $260-million in royalties, a measly 1.5%. That’s ten times less than the tip you leave at a restaurant! Even more scandalous, 11 of the 14 mining companies haven’t paid any royalties in 2007-2008. Clearly they are laughing at us. We are far, very far, from the 12% of their profits demanded by the law. There are gigantic profits being made by companies exploiting the riches of our nation, and these profits are being made at the expense of the taxpayer. For example, Quebec taxpayers will be paying out $12-million to manage mine wastes at the Osisko Gold Mine in Malartic.”

For Christian Simard of Nature Quebec and the Coalition Pour que le Quebec ait meilleure mine, “the findings of the Auditor indicate the problems go beyond our worst fears”.

“The report” he continues “shows that Quebec taxpayers are being taken by an industry that doesn’t even meet its minimal financial obligations. It’s even worse on the environmental side. The guarantees for mine rehabilitation total $109-million, on a bill evaluated at over $350-million: two thirds of the liability rests with the taxpayer while the industry pockets billions. There is also the fact that only 56% of site inspections are reported on and even fewer have any follow up.”

“What’s more” he says “ the Minister of Natural Resources is ignoring the advice of the Minister of the Environment and is not evaluating the solvency of the third-party guarantors, responsible for ensuring the rehabilitation of mine sites. Natural Resources liberates the industry of their obligations, without applying a rigorous or uniform criteria. In the auditor general’s opinion we are facing a pervasive laxness, and conservation – a part of Natural Resources mandate – is being completely brushed aside.”

“In this context”, concludes the spokesperson for Nature Quebec, “we can understand how industry finds Quebec to be a mining paradise. But,” he says “this paradise is a nightmare for the taxpayers who foot the bill for the pillage.” It is unacceptable that Quebec prepares to open the “Grand Nord” to this industry in this kind of policy context, even more so as we see the increase in open-pit mines like Osisko.

“Looking ahead there are sufficient reasons for establishing a pause in the industry until the re-writing of the Mining Act” in order to integrate the development of this industry with the social and environmental dimensions that, according to the Auditor General, have been all but forgotten.