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Benefits of a Gold Mine to Provincial, Regional and Local Economy

By Frank Giorno

Nov 12, 2014

The development of a gold mine in Northern Ontario creates economic benefits for the region where it is located as well as the overall Ontario economy concluded a study released by the Rotman School of Management at the University of Toronto that was commissioned by the Ontario Mining Association.

The Study examined the impacts from the construction of an open pit and underground gold mine.

Open Pit Gold Mine

A new open pit gold mine cost $750 million spread over three years to construct.  That excludes all exploration, planning, permitting and other preconstruction expenditures. Over a 20 year lifespan, the mine generates sales of $300 million per year, and employs 440 persons on site with total compensation of $142,200 per worker.

The combined direct, indirect and induced economic impacts of an open pit gold mine extend from the construction to production stages. In its construction phase the mine adds about $183 million to Ontario GDP and generates over 1,900 jobs annually. In its production phase, for each year of operation, the mine adds approximately $300 million to Ontario GDP and increases Ontario’s employment by over 1,800 at a rate of compensation per employee well above the provincial average.

Government revenues also benefit by the construction of an open pit mine. In the construction phase governments collect a total of $60 million a year from the mine’s direct, indirect and induced activity, while in the production phase this rises to $95 million per year. The provincial government’s share is $25 million in the construction phase, and over $38 million in the production phase.

Underground Gold Mine

In the construction phase an underground mine adds almost $150 million to Ontario’s GDP and creates 1,500 jobs in each of the three years. When in production the mine contributes over $330 million per year to Ontario GDP and generates 2,200 additional jobs annually, again with a very high average rate of labour compensation. In the construction phase of a new underground gold mine, governments collect just under $50 million a year from the direct, indirect and induced impacts, with the provincial government receiving $20 million. In the production phase, all governments receive over $100 million per year, with over $40 million going to the provincial government.

Economic Benefits

The study examined the impact that arose from the building of a new mine through four layers of benefits – direct, indirect, induced. The indirect benefits are defined as the purchases from mining supply and service companies to build the mine and to go into production. It also includes the purchases that supply and service companies must make to be able to supply the mine. These purchases include providing the transportation facilities to the mine, the purchase of a wide range of accounting, financial and scientific services, and the replacement of machinery and equipment that wears out at the mine in the course of production. Also included are all the inputs required to produce the mine’s purchased inputs – for example, the replacement parts that are needed to maintain the machinery at the mine and the steel that goes into those parts and the energy and transportation services needed to produce the steel.

The induced economic impacts result from the spending of wages and salaries by workers employed both directly by the mine and indirectly in all of the supplier industries.

The regional impacts for a mine in a relatively remote site include the nearest major town or city, as well as all the smaller communities within roughly the same distance. For example, for an open pit gold mine in production, over 1,350 of the total of 1,800 jobs generated are local. For an underground mine, almost 1,700 of the 2,200 jobs generated are in the broad local area.

Benefits to Local and Aboriginal Communities

Given that the mine is assumed to be located in a relatively remote area of Ontario, the local impacts can be seen to some extent as a proxy for opportunities for Aboriginal individuals and businesses in the broadly surrounding area.

At the fourth level down the economic activity is associated with maintaining the local community: Local government workers, teachers, police, fire and health care. Beyond the employment impacts, and the encouragement of local entrepreneurship, there will also be direct monetary benefits to Aboriginal communities through Impact Benefit Agreements (IBAs).

Intangible Benefits

Finally, there are the intangible benefits of the provision of key infrastructure, such as access roads and electrical grid connections, that are part of the costs of constructing either open-pit or underground mines in remote locations. As with transferable skills, these remain behind to benefit individuals and the remote community even when the mine eventually closes down.

Advanced Gold Mining Projects in Ontario

In Ontario there are a number of advanced gold mining projects that are nearing the mine construction phase. Among them are Gowest Gold’s Bradshaw project, Goldcorp’s Hollinger Open Pit, St. Andrews Goldfields Holloway project, IAMGOLD’s Côté Lake, Kerr Mines MacGarry Mines project, Agnico-Eagle’s Upper Beaver Project and Northern Gold’s Garrison project. All these projects are located in the Timmins- Kirkland Lake area of North Eastern Ontario.

In North Western Ontario advanced gold mining projects include Rubicon Gold’s Phoenix Gold project, Goldcorp’s Cochenour Bruce Channel project, PC Resources’ Pickle Crow project, Treasury Metals Goliath Gold mine project, Coventry Resources’ Cameron Gold mine and Agnico-Eagles’ Hammond Reef project.

For a listing of Ontario’s advanced mining projects please visit http://www.oma.on.ca/en/ontariomining/AdvancedExploration.asp

For a copy of the Rotman study " An Au-thentic Opportunity: The Economic Impacts of a New Gold Mine in Ontario" click on the following link  www.oma.on.ca/en/resourcesGeneral/PEAPgoldmineFinalReport.pdf