Quebec's Minister of Finance Nicolas Marceau smiles as he shows a mock copy of his budget during a photo-op at his office in Quebec City.MATHIEU BELANGER/Reuters
The sword of Damocles still hangs over the head of Quebec's mining sector. But the industry's leaders are taking comfort in the fact that Nicolas Marceau, the province's new Finance Minister, is at least willing to talk about changes to the royalty regime.
Mr. Marceau's first budget, prepared in haste and unveiled Tuesday, maintains the current royalty of 16 per cent on each mine's individual profits. During the election, the Parti Québécois had vowed to replace it with new structure that would impose a 5-per-cent royalty on the value of production, coupled with a 30-per-cent "supertax" on any profits above prescribed rate of return.
While some expected the budget to spell out those changes, Mr. Marceau announced that he will consult the industry first.
"To open dialogue is a positive first step," said Jean-Marc Lulin, president and chief executive officer of Azimut Exploration Inc. and outgoing president of the Quebec Mineral Exploration Association.
"While mining companies are not jumping up and down, they are relieved. They feel they will at least get a shot at making their case," said Nochane Rousseau, partner and leader for the mining sector at PricewaterhouseCoopers.
But Mr. Marceau remains determined to reform Quebec's regime to collect an estimated $388-million in extra revenue. "We started working on a new framework and this regime will come into force in a matter of months," he said.
Changing Quebec's mining rules so soon after the former Liberal government raised the royalty on profits to 16 per cent, from the previous 12 per cent, upsets investors who are looking for stability before committing to long-term investments, Mr. Rousseau said.
For Mr. Lulin, this is especially true now that the mining boom is loosing steam. "Our competitive advantage in the world lies in our legal, political and fiscal regime," he said. "You can't toy with that without putting investments at risk."
The minority PQ government is forecasting that its royalty revenues will decrease by 21 per cent in the next five years because of falling commodity prices. Quebec now expects to collect more than $1.5-billion between 2012 and 2017 instead of close to $2-billion.
While Yves-Thomas Dorval, president of the business lobby group Conseil du patronat du Québec, said he is pleased that Mr. Marceau heard his organization's plea for consultations. He remains cautious, however. "There is no guarantee that the industry's opinion will be taken into account," he said.
"We will be heard in a forum that has yet to be determined," said Josée Méthot, president and CEO of the Mining Association of Quebec. "But I won't presume that they will listen to us."