The Canadian Mineral Industry

COLONEL HILBORN:

I am particularly grateful, on this my last meeting as your President, for the privilege of introducing a leader in an industry on which the broad foundations of this entire nation rest. Mining has served to push back our frontiers by supplying the first practical proof of the friendliness of the north. It has coloured every aspect of Canadian life and in transforming our economical and social life, it has given Canada the stature of a great power with an arresting position in the complex world of today.

Albert L. Fairley Jr. represents a strong reversal o€ our oft-lamented brain drain. He selected for his birth and for his education at high school and college levels two American cities for whose subsequent prominence he, in all honesty and modesty, takes no credit. He was born in Jackson, Mississippi and educated in Birmingham, Alabama. It was in 1959 that he integrated himself into Canadian industrial life as President of Dominion Steel and Coal Corporation.

Following post graduate work in geology and mining engineering at John Hopkins University, Mr. Fairley served as a geologist and engineer with the Tennessee Valley Authority and with a division of United States Steel Corporation. Immediately prior to his enlistment as a private in the U.S. Army Air Force in 1943 he was Assistant Deputy Director of the Steel Division of the U.S. War Production Board. Following his discharge in 1946 as a Captain he joined the Shenango Furnace Company of Pittsburgh whose Vice-President he was, when he left Pittsburgh to come to Canada. This is quite a feat in itself as you will know if you have ever tried to get out of Pittsburgh.

Retiring as President of Dominion Steel and Coal in 1964, he assumed the Presidency and role of Chief Executive Officer of Hollinger Consolidated Gold Mines, the tale of whose beginnings and growth is probably the most colourful and exciting saga in the whole history of Canadian mining. Recently he has been elected to the boards of the Canadian Imperial Bank of Commerce and the Crown Trust Company.

Samuel Butler wrote, "Though wisdom cannot be gotten for gold, still less can it be gotten without it. Gold, or the value of what is equivalent to gold, lies at the root of wis dom." And, if anyone questions Samuel Butler on this, I can arrange to have someone from the York University campaign call upon you.

A geologist, mining engineer and outstanding corporation executive "Much travelled in the realms of gold, and many goodly states and kingdoms seen", it is my honour to present and your privilege to receive Mr. A. L. Fairley, Jr., who will speak to us, in depth I am sure, on "The Canadian Mineral Industry".

MR. FAIRLEY:

It was with a great deal of pleasure that I accepted the invitation to talk to you today. It provides me with an opportunity to discuss a subject that I have been intimately associated with since college days and one, I believe, that needs to be talked about. I refer, of course, to the mineral industry and particularly the Canadian mineral industry.

Now, after uttering just a few words, it will, I think, be readily apparent to you that I am not a native of the fair City of Toronto, although it is one of my favourite places. As a matter of fact, I'm in sort of a peculiar position. I am an American citizen, raised in the Confederate State of Alabama, living in the magnificent City of Montreal, and running companies incorporated in Ontario, Quebec, and Newfoundland. There are those who claim this makes me a real mixed up kid, and there are times, gentlemen, when I'm inclined to agree with them. However, looking at it another way, it may be this makes me one of those much soughtafter, but rarely found, multilingual, multicultural persons. However, "mixed up" or multicultural, whichever way you care to look at it, I'm going to talk to you today about one of my real loves--The Canadian Mineral Industry.

An examination of the Canadian mining scene today reveals a growth industry, based on more than sixty mineral commodities dispersed throughout our four million square miles. The growth of the industry in this century, and in this decade, has been spectacular. Since World War If, this rate of growth has been double that of the world mineral industry as a whole. If a satisfactory economic and political climate continues, the next decade can be even more rewarding. Such a situation is both possible and desirable--not only to the Canadian industry but to all Canadians.

It is a cardinal error to assume that the welfare of the mineral industry concerns only those people directly involved in it. International trade is the bloodstream of the Canadian economy and, in these terms, the well-being of the country is more securely linked to the mineral industry than to any other single industry. Canada's mineral industry is, in fact, the back-bone of the country's contemporary economy; perhaps, to use a phrase more closely allied to the industry, it should be called the "bed-rock" of the country's financial strength and its major opportunity for progress. I hope, at the conclusion of this talk, to leave you as convinced of this fact as I am.

It may not be generally realized by all, but mining in Canada is deeply rooted in the traditions of the country. The industry has been a functioning part of our working history since the days of the earliest explorers. The despatches of Jacques Cartier contained reports from the Montagnais Indians of the Saguenay regarding the existence of copper and gold beyond the headwaters of that River; some modern historians connect these reports with the now-known deposits of Chibougamau. Martin Frobisher reported evidence of extensive mineralization on Baffin Island after his expedition in 1577-78. Champlain's men found copper by the Baie de Chaleur, not far from Gaspe Copper Mines.

A forge based on bog iron ore operated intermittently from 1737 to 1883 on the St. Maurice River, supplying much of the ironware needed in that period. The first pig iron furnace was built in Upper Canada in Leeds county in 1800. Between 1868 and 1884, three million troy ounces of silver were mined from Silver Islet--an island about 85 feet in diameter that rises just eight feet above the surface of Lake Superior near the Lakehead. You people who are familiar with Lake Superior may speculate on the effect storms had on this mining enterprise. Your gloomiest opinions would be right, because the whole operation was washed away several times.

Canadian mining is one of those unusual areas of human effort where the romance and colourful folklore is really over-shadowed by the authentic record of the events them selves. It is true, however, that modern Canadian mining has four centuries of rich and exciting history behind it. It is also apparent that this history, and the traditions it nourished, have been effective forces in the spectacular developments of the industry in the 20th century. In this instance, the word "spectacular" is not an exaggeration.

Between 1900 and the end of World War II, the value of mineral production in Canada rose from about 64 million dollars annually to 500 million dollars. In the past 20 years, the value of Canada's annual mineral production has leaped forward more than 600 per cent to the 1964 figure of 3.43 billion dollars. No other major industry has achieved such a rate of growth, nor does any other industry possess such a growth potential.

I think it is fair to say, that in spite of the contributions of the Canadian mineral industry to Canada's progress since the end of World War II, the industry is not well understood by Canadians generally, nor is the role of the industry in the country's economy widely appreciated. In my opinion, there are several reasons for this, but the most potent is, at the same time, the most obvious. The real activity of the industry occurs, not on Bay Street in Toronto nor St. James Street in Montreal, but usually far removed from major centres of population. Canada is rapidly becoming a nation of urban dwellers who have little opportunity to see mining operations and mining communities in action. The economic benefits they derive from these activities are so thoroughly blended in the economic stream that they are not readily visible. Nevertheless, these economic benefits are both measurable and impressive; in one way or another, they affect the lives and living standards of all Canadians.

The mineral industry, for example, employs about 125,000 people. In a national work force of some 6.9 million, the employment of 125,000 by one industry may not appear as a particularly large figure, but its real significance rests on circumstances peculiar to the industry. It is estimated that for every person employed in mining operations, six others are employed in manufacturing and service industries which supply mining companies. In this light, directly and indirectly the mineral industry provides employment for more than 12% of Canada's working labour force. This is a significant figure.

Of equal importance in the context of a growing Canada, is the contribution of the industry to the pioneering traditions on which this continent has been developed. The last frontiers of the new world lie to the north. In this direction, the mineral industry has been moving quickly and effectively. Almost all of the permanent development which has occurred in what was once the far north has been the result of mining enterprise and mineral discoveries.

Many of you will remember when names such as Timmins, Kirkland Lake, Noranda, Red Lake, Yellowknife and Flin Flon were new in the Canadian vocabulary. More will recall when Chibougamau, Manitouwadge, Beaverlodge, Schefferville and Gagnon entered the company of Canadian communities. Even as I talk, such centres as Labrador City, Mattagami, Thompson and others are fleshing out as modern centres of population around recent mining developments. In the past ten years, the great Quebec-Labrador trough with its iron ore deposits has itself transformed two villages into modem centres and, in addition, has nourished into being four substantial, entirely 'new communities, each complete with every modern living convenience.

All of those new mining communities need and develop--in addition to food, clothing, and other personal necessities--schools, hospitals, homes, communication services, transportation services, commercial businesses, utilities and recreational facilities. So, quite apart from the job and business opportunities they create, they set in motion a sequence of requirements which stimulate our economy to its very roots. The opportunities for professional people, tradesmen, merchants and small businessmen in these new communities are extensive. Each new community requires and develops almost every type of facility for service, health, culture and recreation found in larger and older communities. Each development represents opportunity for many people, many professions and many skills.

All this is quite apart from the requirements of the mine or mines which set this sequence in motion. Canadian mines are heavy consumers of machinery and equipment, process .supplies, fuels and electricity, construction material, freight and transportation in its many forms. Annual purchases of machinery and equipment alone by the Canadian mining industry total more than 200 million dollars. Since, by policy, the mines try to purchase Canadian-made goods, the vast majority of these purchases are made from Canadian companies, and provide employment to Canadians.

One more thing I would like to add on this subject: salaries and wages in the mining industry are higher than those in any other industry in Canada. As a result, mining communities are high-income communities with real purchasing power to pump into the economic stream of the country.

Most of the mining developments of recent years have taken place, as I mentioned earlier, hundreds of miles from the big cities, but in terms of speed of access and communi cations they are, in fact, today much less remote than Cobalt was at the beginning of the century, or the Porcupine or Kirkland Lake a few years later. In today's concept of pioneering, I also find one interesting reversal of a pattern. In the last century, it was the building of railways that led to the discovery of asbestos deposits in the Eastern Townships of Quebec, nickel deposits in the Sudbury Basin and silver deposits in Cobalt. But in recent years, it has been the discovery and development of mineral deposits which have led to the building of railways. Since World War II, more than 1,600 miles of new railway track has been laid, all for the purpose of serving new mining communities and new mining operations.

And so, the visible contributions of the industry to Canada's development have been impressive; but in another equally important but less visible field--that of foreign trade--the contribution has been unique. On a per capita basis, Canada is truly a great trading nation, a world leader, in fact. I need not dwell on how closely our standard of living and our progress are linked to export trade, which represents almost a quarter of the national income. In its contributions to export trade and foreign exchange, the Canadian mining industry stands alone among Canadian industries. In 1964, the export value of the Canadian mineral industry's products again exceeded the two-billion-dollar mark-a figure considerably larger than that derived from any other industry. In fact, the foreign exchange returned to Canada by these exports was almost as great as that of manufacturing, agriculture, and fishing combined. They amounted to one-third of Canada's total exports.

Here, in my opinion, is a situation many Canadians have failed to observe. But the record is clear on the subject. As late as 1950, the value of Canadian exports of mineral origin was approximately 840 million dollars, or about 95% of the export value of products of the farming industry and about 76% of those of forest origin. By 1953, the export value of the mineral industry's products had edged past that of the farming industry and was close on the heels of the forest industries. By 1957, the export value of mineral products was more than double those of agricultural origin and substantially above those of the forest industries. By 1963, they had passed the two-billion-dollar mark, returning some 400 million more than even the great forest products industry. In 1963, the exports of the mineral industry represented 32% of the country's total of 6.7 billion dollars. Forestry products were second with 26%, followed by farming and fishing with 21.6 % and manufacturing with 19.7 %.

The figures for 1964 of approximately 2.2 billion dollars show further strength in the export as well as the domestic field. If it is true that Canada needs more export trade--and it obviously is--here is an industry that holds vast promise for the Canadian economy. No other industry is growing at this rate. No other industry comes close to the growth potential of the mineral industry in the decade ahead of us. Here, indeed, is an industry in which Canadians excel. It represents something we can do, something we should do, and something we must do.

I would like to stress one more point on the subject of the mineral industry in relation to Canada's export trade. Canada has a regular trade deficit, as we all know, with the United States. Between 60 and 65% of Canada's mineral exports go to the United States. The exchange returned from these exports in the past six years has been the largest single factor in keeping this deficit within manageable proportions.

Against this economic background, it is a fortunate fact that Canada's surface has been merely scratched for minerals. If evidence of this were needed, it was supplied by Texas Gulf Sulphur just one year and one week ago today with the announcement of the discovery of a major copperzinc-silver orebody just a few miles from Timmins, a gold mining centre that has been world famous for more than half a century. New prospecting and exploration methods have reshaped the concept of mineral-seeking even in the older areas. And, in the last ten years, these new methods have also opened up huge new areas that have not been systematically prospected before.

We hear much of secondary industry and the need to expand this type of business. I agree with this completely and believe it should be pursued aggressively. As far as eco nomically practical and feasible, the output of our mineral industry should be processed in Canada. There should be no slackening in our efforts to achieve this objective. But, regardless of the effort put forth in this direction, I am equally convinced that Canadian secondary manufacturing and Canadian processing of mineral products can never, in our lifetime, even approach the potential of Canadian mineral production. The pathway that will allow Canadians the maximum benefit from these resources is clearly marked: we should make every effort to expand the production and export of both raw and finished product to the full extent of available markets. But let us not dally--or slacken our efforts to find, develop, produce and export the raw product, simply because, for economic or other reasons, our processing or manufacturing industry is not advancing as fast as we would like.

All available evidence, then, points to the conclusion that the Canadian mineral industry has more potential for massive economic growth than that of any other industry in Canada. It therefore represents the greatest single opportunity to strengthen Canada's basic economic structure.

But, I would be misleading you if I were to suggest that this expansion can come easily. The cost of finding, developing and launching a new mine under contemporary conditions in Canada is formidable.

In recent years, the estimated average cost of finding each new mine, which has reached production, has been about 30 million dollars. Development costs before produc tion begins are even greater. In the case of the iron ore properties in which my company is heavily committed, they were more than 10 times greater. Because of these initial costs, together with the long-range nature of such investments, the political stability and the nature of the country's tax laws are vitally important to the mineral industry. .

Canada, of course, has a good record of political stability. We also have good mineral tax laws. These laws have been set up to encourage development of our mineral resources-and indeed they have. They are more conducive to mining development than those of the United States; but they are not as good as the laws of some other countries which also depend heavily on the mineral industry for both domestic and export needs. The laws of South Africa, for example, as they apply to the mining industry, are quite superior to those of Canada. Our tax laws could be improved, but in my opinion, they do reflect a recognition of the national importance and need for the continued development of the mineral industry. It is my sincere hope that the royal commission on taxation, now sitting, and the present and future governments will also recognize this need.

Having pointed out some of the good and advantageous things about the Canadian mining industry, I would be grossly remiss if I failed to point out some of the major problems confronting it. I believe, as I've said before, we have just scratched the surface of our mineral development in Canada-but many other countries have reached the same conclusion about the industry within their boundaries. Russia, China and other parts of the East are expanding their mineral industries at a rapid rate. A recent press report indicates that Russia has passed Canada in the production of asbestos, a product in which we had long been dominant.

Many areas in the underdeveloped but rapidly developing countries of Africa and South America have not even been physically explored, much less prospected. Thus the potential for increased mineral production in other parts of the world is not only ripe for development but is, in fact, experiencing an explosive expansion. This has intensified competition in world markets.

One particular example of this competition is iron ore, a subject very close to my heart. In the Quebec-Labrador trough, we have one of the three or four largest iron ore areas in the world. When it was opened in 1954-after more than 20 years work by my company-the ore was considered to be of good commercial grade. Within five years, metallurgical advances in the steel industry had changed this. By present world standards, the ore from this source is, at best, medium grade, requiring the expenditure of huge amounts of money, both for capital investment and operating costs, to bring it to acceptable standards for the modern blast furnace. This we are doing-but it does take massive amounts of capital.

In other parts of the world, particularly Africa and South America, there are resources of very high grade iron ore which can be mined and shipped "as is." Australia has also entered the market, providing a price threat to our West Coast producers. Liberia, another example, has developed and is producing extremely high-grade ore from large, low-cost deposits. In many countries now competing in the iron ore markets, labour rates are much lower than those in Canada. As a consequence, world iron ore markets are under heavy pressure, and the glut of iron ore in the world has made the business bitterly competitive.

Canada has a total of 17 mines producing iron ore and, in value of output, this commodity has moved into first place, having overtaken both copper and nickel. This iron ore segment of the industry survives on exports-representing between 85 and 90% of its total production, which in 1964 exceeded 38 million short tons. This total is expected to reach 48 million tons within a' few years. Such a performance will indeed be useful when interpreted to our foreign exchange balance sheet. But, if it is achieved, it will take place in the face of severe competition. The success enjoyed in meeting this competition will depend, in part, on the success of lowering production costs and, in part, on the social and political climate which encourage such efforts.

Copper, another major Canadian mineral product, can be produced far cheaper in Chile, Rhodesia and even in the Congo, despite current difficulties, than it can be produced in Canada. I could go on to name many such comparisons, but instead I will merely emphasize that these are facts that federal and provincial governments should keep clearly in mind when developing taxation and other policies relating to the mineral industries.

Specifically, and in conclusion, I want to make the point perfectly clear that, while I am extremely optimistic about the mineral industry in Canada, it is not going to expand

by itself. It will take work, capital, aggressive salesmanship, good management, and the utmost co-operation of both federal and provincial governments and labour, to keep it healthy and to keep it growing. But given aggressive management and the co-operation of government and labour, I am convinced that the Canadian mineral industry will continue to grow and will continue to be a major foundation of the expanding economy of this great country. Thank you.

Thanks

Thanks of this meeting were expressed by Lt. Col. E. A. Royce, Vice-President of the Empire Club.