Headwinds and Tailwinds from resources
January 11, 2014
The northern economy has government expenditure as the base for the bulk of economic activity. Resource development activities can mean the difference between a robust, growing economy and a low growth one mired in high unemployment.
Here are some of the significant headwinds and tailwinds facing each jurisdiction:
- Alaska. Headwind: the State will face a $2.190 billion general fund deficit in 2014 based on anticipated spending of $7.1 billion. Fortunately the state has about $16 billion in available cash reserves to cover this deficit. Tailwind: North Slope capital spending is expected to increase from $2B in 2010 to more than $4B in 2014.
- Yukon. Headwind: low silver prices have led to the closure of the small Bellekeno mine at Keno. Victoria Gold has yet to raise $400M in order to fund a new gold mine near Mayo. Tailwind: Territorial finances are in great shape and the unemployment rate at 5.3% is near the lowest in Canada.
- NWT. Headwind. Aging diamond mines are due to start closing later this decade. They are the largest private sector employers with more than 2,000 highly paid employees. Tailwind: The oil and gas sector is providing jobs in the Norman Wells area, in the Cameron Hills and potentially in the Beaufort Sea if Imperial Oil decides to drill in the Arctic.
- Nunavut. Headwind. Workforce skill development and housing are the twin challenges for Nunavut. Mines have been hard-pressed to increase northern employment above 20% of the workforce. Tailwind. The giant Mary River iron ore project is due to get underway this year, with another large iron ore project pending.
- Greenland. Headwind. There are currently no operating mines in Greenland. The population is stagnant and the workforce lacks skills required by resource development enterprises. Tailwind. The Government of Greenland has decided to allow uranium mining and has given the green flag to mineral development.
- Northern BC. Headwind. There are not enough people in northwestern BC to supply the workforce. Housing prices have begun to steeply climb. Tailwinds. Lots of economic development, currently including hydro projects and the Red Chris mine. In the near future LNG and pipeline activity plus more mines.
- Northern Alberta. Headwind. Shortages of diluent and skilled people for oil sands projects. Hard to get new pipeline capacity to export bitumen. Tailwinds. The giant Kearl oil sands project has started up and the Fort Hills project will soon start construction.
- Northern Saskatchewan. Headwind. Uranium prices have been low and slow to increase. Tailwind. The Cigar Lake mine will open in 2014, the most lucrative uranium mine in the world.
- Northern Manitoba. Headwind. Development of the upper Nelson River is still years away from happening. Tailwind. The Port of Churchill is seeking new life as an export hub for oil.
- Nunavik. Headwind. A second mine near Raglan is stalled in its development. Tailwind. The Quebec government has passed a new mining royalty regime—the specter of uncertainty has been removed.
The abundance of resource development opportunities in the north augers well for future prosperity.