Friday August 01, 2014





Big mine, big money: Ajax will spend billions over life of the mine

The Ajax File: All That Glitters — Part 2 of 5
Keith Anderson

Venture Kamloops executive director Dan Sulz at his desk looking over documents.

Cast aside formulas designed by economic development promoters and instead look strictly at direct spending to begin to understand the impact of Ajax Mine on Kamloops.

"During the two years of construction, every day for two years, the joint venture (KGHM and Abacus) will spend $700,000 a day," said Jim Excell, president and CEO of Abacus Mining and Exploration Corp.

"That adds up to $500 (million) to $600 million."

And that's just the start. Production spending, which includes everything from salaries to equipment, is expected to be in the neighbourhood of $600,000 a day — or about $6 billion in direct spending over the 25-year life of the mine.

Everything about the Ajax deposit, located on mid-elevation grasslands, home to ranching for more than 100 years, is big, including the money.

Any mine is comprised of much more than a pit and mill. Each of the two rock dumps — towering 100 metres or more — is larger than the Ajax pit itself and the tailings footprint is twice as big.

Together, KGHM-Abacus estimates a disturbed area of about 2,500 hectares — a little less than 10 per cent of the entire City of Kamloops.

In return, it promises upwards of 350 jobs. Dan Sulz, executive director of Venture Kamloops, said KGHM Ajax will present a report as part of the Environmental Assessment Office process that will estimate economic impacts.

In general, for every one direct job there are another 2.5 from spinoffs in service industries and unrelated work.

But Venture Kamloops also wants a reality check on corporate claims. Rather than writing its own report, Sulz said it is looking at commissioning an independent audit of the KGHM numbers.

"Everyone can agree there will be huge economic impact to the community. But the question is at what cost to the social side and environment. What's acceptable?"

While questions remain about the balance of potential harm versus the economic benefits, there is little question the federal and provincial governments stand to reap huge rewards from Ajax, just as they will at neighbouring New Gold Inc.'s New Afton project.

Ajax is slated to produce about 30 per cent more copper per year and about 15 per cent more gold than the underground New Afton project.

Bob Gallagher, president and CEO of New Gold, said any mine in B.C. contributes in three ways to Victoria and Ottawa: royalties, corporate taxes and through income taxes on workers.

At today's prices, once New Afton begins production next year, it will pay about $30 million a year in royalties to the province based on 13 per cent of revenue; $65 million in federal and provincial corporate income tax after deductions and cost allowances; and its 350 employees will add another $10 million in federal and provincial taxes.

Based on those numbers, the provincial take from Ajax could be in the order of $125 million a year.

"In total, the B.C. tax regime is fine," Gallagher said. "It's not a disincentive in any way."

Zoe Younger, acting president of the Mining Association of B.C., said mining now provides a bigger part of the gross domestic product than forestry through exploration and production.

Those, in turn, provide jobs for rural communities and taxes to the province to pay for vital services of health care and education.

In 2008, the last year for which statistics are available, mining provided $545 million in direct taxes and levies to government, at far lower mineral prices.

"It (Ajax) would be a great story for B.C…. Part of the reason people are investing here is because we're really good at it."

In addition to Ajax and New Gold in this region is Highland Valley Copper, which has operated for decades, providing millions of dollars in payroll into Kamloops and the surrounding communities. Within three hours to the south and north are Copper Mountain at Princeton and Gibraltar at Williams Lake.

Sulz said Kamloops is at the heart of the action and could become far more important as a national centre of mining. Yet for that status, Thompson Rivers University has no geology degree, no engineering and delivers only trades and job-specific training.

Christopher Seguin, vice-president of advancement at TRU, said the university has responded to job-specific training with New Gold, is an "industry leader" churning out trades workers for mining and is looking at expanding geology offerings, but cautioned it has to "take the long-term view.

"Of course we're listening to opportunities and looking at trends."

Venture Kamloops will look at opportunities that may come to TRU or elsewhere to leverage from a mining capital status for Canada's Tournament Capital, Sulz said.

"We're supportive but we want to make sure it's the right fit for Kamloops."


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