[Recorded by Electronic Apparatus]
Tuesday, November 19, 1996
.1114 
[English]
The Chairman: I call the meeting to order.
We're pleased to be continuing our study on rural development, and I'm pleased today to have as our first witness from the Farm Credit Corporation, Max Pierce.
Mr. Pierce, I understand you have a brief presentation to make. Then we'll turn it over to questions.
Mr. Max Pierce (Executive Vice-President and Chief Economist, Farm Credit Corporation): That's correct, sir.
The Chairman: Please proceed.
Mr. Pierce: Thank you, Mr. Chairman.
Good morning. Thank you for the opportunity to provide you with information on how FCC currently supports rural economic development and what plans we have with respect to how we might be able to enhance this support.
I'm accompanied by John van Abbema, our vice-president in lending operations, who focuses on the Quebec and maritime regions.
I would also like to apologize to members for the overhead presentation being in English. In your handouts you will have a translated version of the presentation and my comments in both French and English.
I'd like to give a quick overview of what I'll be presenting, to give you some idea of what FCC is about. It's a snapshot of our role and mandate, a brief description of some of the partnerships and alliances we've entered into, a description of how FCC is different from another financial institution, what we perceive to be some of the government objectives in agriculture and the challenges that industry faces, how FCC contributes to these objectives and challenges, and finally what we'd like to do to change our act to be better able to support the objectives and challenges of the industry.
.1115
First of all, we are an organization with a lending portfolio of approximately $4.1 billion. Last year we lent approximately $1 billion, made up of about 10,000 loans. This reflects an average annual growth rate of about 30% over the last five years. The way we view it, if our services are preferred, we believe we're bringing value-added to the industry, making our agricultural producers more effective and internationally competitive.
Our net income last year was $40 million, and I would also like to add that we paid a dividend in the neighbourhood of $4 million. I think it's the only financial crown that has done so. We have over 60,000 loan accounts. We service our clientele from offices...about 100 from the east coast to the west coast. Over 90% of these offices are located in what you would call non-metropolitan areas. Of our portfolio is made up of about 95% of loans to primary agriculture and somewhat less than 5% with respect to agribusiness. In total we account for about 14% of total farm debt.
Our role is very simple and straightforward: it is to provide financial services to primary agriculture and agribusiness, and we serve as an instrument of public policy.
In 1993 we had our legislative mandate change. With this change we are now able to negotiate loans in excess of $600,000, we're able to support part-time or lifestyle farmers, we make loans to producers with value-added enterprises, and we provide non-mortgage loans.
We cannot be all things to all people and still achieve cost recovery, so we try to enhance our service delivery through partnerships and alliances. A good example is with respect to the Western Economic Diversification office, CIBC and FCC, which together provide financing for western Canadian value-added firms. These firms tend to be new start-ups or expanding operations that have above-average risk. It's a very effective way of leveraging public sector funds to support this kind of expansion.
We also finance feeder livestock through Heartland Livestock Services. In addition, FCC and the Alberta Agriculture Financial Services Corporation deliver services to specific markets. Again, this is an interesting example of how governments cooperate to eliminate duplication, complement one another, and improve services to clientele.
Just before I go into our distinctiveness, I would like to mention that the Standing Committee on Industry commissioned a study some time ago on what capital market gaps or inefficiencies might exist. They identified four areas: a knowledge gap, a flexibility gap, a risk gap and a size gap. A recent study that the CBA commissioned also indicated that, yes, financial institutions could improve their knowledge of the business sectors to which they lend, and there could be improvement with respect to flexibility of repayment terms.
FCC specializes in agriculture-related lending. Our staff and culture are oriented to agriculture. Our loan officers come from a farm background. They're agronomists. As a result of this intimate knowledge of the industry, we sometimes lend closer to the edge. We will approve loans rejected by banks and other financial institutions, and sometimes we're criticized for this. So in a sense we do act on occasion as a lender of last resort.
At the same time, we offer some unique products. We are able to provide long-term loans with interest terms of up to twenty years. We have a product called the shared-risk mortgage, where we share the interest rate risk that clientele face. We have a product called a family farm loan, which enables aging parents to transfer farms to sons, daughters and other relatives.
.1120
Another unique feature about FCC that addresses one of the gaps is this flexibility concern. We are willing to sit down with our clientele and structure repayment terms in conformity with the cashflow faced by the farmer or the agribusiness enterprise. So you can have monthly repayments, biannual repayments or two or three repayments at different times of the year in accordance with the cashflow.
Another unique feature is that we have a continuous lending presence. We are there in good times and bad times. This is the only business that FCC deals with, and we operate coast to coast providing a level playing field for our clientele.
On the third gap, you might recall that various studies have identified this so-called size gap. Generally, loans of less than $100,000 tend to be underserved. With respect to FCC, more than half of our loans are less than $50,000, and almost three-quarters of them are less than $100,000. We have a very clear focus on improving access to capital for agriculture, and as a result we are a competitive influence on banks. Yes, in some cases we do compete with the banks, but we have an interesting perspective that's quite different from the banks. If a client comes to FCC and rather than making a loan to a client he goes across the street to a bank, we perceive that as a win. It's a win for the client and a win for FCC because we're lowering the cost of capital to agricultural producers.
In summary, do we act as a lender of last resort on occasion? Yes, we do. Are we complementary to the private sector? Yes, we are. Do we compete on occasion with the private sector? Yes, we do. We also serve as an instrument of public policy. Where are the windows on agricultural financial needs for government policy-making?
We also serve as a delivery agent of government programs - by way of example, our cattle options pilot program. This program enables farmers to offset the risk of price fluctuations and foreign exchange fluctuations with a single telephone call. Banks were invited to manage this particular program, but did not display interest in so doing.
We also deliver the national biomass ethanol program. We recently concluded a backstop financing agreement with Commercial Alcohols Inc. in Chatham, a project that is over $100 million in terms of capital investment. We also administer the business planning for Agri Venture. This program is both educational in nature, in terms of how to develop a business plan, and provides financial assistance to clientele, the expertise to go out and actually develop a business plan.
In terms of government objectives in agriculture, an important one that this committee is concerned with is enhancing access to capital, especially for beginning farmers. The average age of the farmer in Canada is over 50 years. The concern is both with respect to debt and to equity, and also for expanding agribusinesses.
Rural economic development is an important concern for government, and not only with respect to job creation. When development takes place your tax base is increased, additional services can be provided by a community, and there's some positive influence in stopping the drain of young, educated people who can contribute to the community. It also provides opportunities for off-farm income.
The government is concerned with encouraging value-added and diversification initiatives. We currently have an export target of $23 billion by the year 2000. This will simply recapture our historical market share with respect to agricultural exports, and there is increased emphasis on delivering higher-value and more consumer-oriented products.
.1125
There's also a concern to reduce duplication and overlap between federal and provincial governments, within federal departments and between federal departments as well.
An additional objective in government is to encourage partnering and alliances with the private sector to improve overall industry efficiencies as well as economic growth. We have recently struck up an alliance with the American Farm Credit System whereby a short-line manufacturer in Canada, if he wishes to expand his operations into the U.S., is able to come to Farm Credit and we're able to direct him to our alliance partner in the U.S. So he has one-stop shopping to achieve North American financing. Similarly, if the American client wishes to expand into Canada, the Farm Credit System in the U.S. is able to use the services of the Farm Credit Corporation in Canada.
Cost recovery is an important consideration as well. We wish to achieve these objectives in agriculture without an increase in expenditures or in subsidies.
Market adjustment is another important consideration, particularly with respect to the elimination of the WGTA and the increased opportunities this will now present with respect to value added and diversification opportunities.
In assessing where FCC can add the most value, we focus on agriculture and industry challenges. With respect to the industry, they are trying, as I just mentioned, to respond to dramatic changes in the marketplace, particularly with respect to the WGTA changes. They're also trying to improve the use of technology and information, to increase sources to equity financing, and to promote the intergenerational transfer of farm assets.
By the way, we have devised a product called the family farm loan, which provides security to parents in terms of an income stream and with respect to their assets. It enables the son, daughter or relative to acquire the farm with a very low down payment and very little collateral. This product, when we presented it to our alliance partner in the U.S., was so interesting that they immediately adapted it for their farm clients in the U.S.
Given the government objectives and industry challenges, FCC would like to enhance its support for agriculture in the following manner. We are seeking legislative amendments that would enable us to enhance access to capital to agribusiness, small and medium enterprises. Currently our lending criteria or restrictions are based on who controls the enterprise rather than the purpose of the loan. So if we have two brothers who wish to set up a seed-cleaning operation, and the brother who's farming has control of the seed-cleaning operation, we are able to make the loan. If the brother lives in town and he has control of the seed-cleaning operation, Farm Credit Corporation cannot make the loan. We're saying that really, as long as the loan is related to agriculture, Farm Credit Corporation should be able to make that loan.
We'd like to improve our assistance to new and beginning farmers. We'd like to be able to offer leasing products for land as well as for equipment. This reduces upfront capital requirements, and as we can appreciate, for a beginning farmer capital is extremely scarce.
We'd also like to offer new financial services and products for value-added and diversification initiatives. By offering what we call patient capital products...again, it is well known that a start-up operation tends to be cash-starved. We would like to be able to provide a loan whereby the principal repayment is deferred and perhaps the interest is capitalized, but when the enterprise is successful, we'd like to be able to participate in that success, say through a warrant or a convertible debenture to offset the higher losses we'll occur in engaging in this kind of lending.
.1130
We also wish to offer related services and information sources with respect to land management and the database of land sales for industry use. Our first nations people are investing millions of dollars in agricultural land. Currently they do not have the infrastructure in place in terms of reporting systems, land sales information, and market knowledge in terms of negotiating contracts. The way our current act reads, we're not able to provide these services unless the first nations people also obtain their financing from Farm Credit Corporation. We'd like to be able to provide these third-party services over and above what we're currently able to do.
Finally, we would like to attract capital from non-traditional sources such as farm organizations, cooperatives and provinces. As members may know, a few years back we were able to purchase the portfolio from New Brunswick, thereby eliminating duplication between two levels of government and allowing the province to refocus its scarce resources in areas of interest to the province. We are engaged in negotiations with other provinces.
However, when we acquire our loan portfolio, we have to borrow the funds on the market to pay the province. We also have limitations, as a business, in terms of the amount of debt that our limited equity base can support. If we were to acquire another provincial portfolio, we would like to be able to structure the deal in such a way that the province, if so inclined, may wish to invest in FCC. That way, we are able to finance the program with both debt and equity, and perhaps allow a repurchase of that equity investment down the road once the corporation is able to refinance the equity. At the moment we're not able to engage in this kind of activity.
Finally, to ensure that our proposed direction is beneficial to the industry as a whole, we will continue to communicate with industry stakeholders. We will try to support the industry by meeting client needs. We will also support public policy in other government organizations by meeting government objectives.
I would like to thank members for the opportunity to provide you with the information on how FCC currently supports rural economic growth and how we'd like to enhance this support in the future. John and I invite the so-called tough questions raised by the CBA representatives, particularly with regard to an uneven playing field and how FCC cherry-picks deposits and loans from rural branches.
Thank you, Mr. Chairman.
The Chairman: Thank you.
[Translation]
Mr. Deshaies.
Mr. Deshaies (Abitibi): I have a question for Mr. Pierce. You have an excellent program to promote agricultural development in Canada. You are telling us that your bank must frequently be a last resort lender, and that you compete with other banks.
Do you not fear that, because of government budget cuts, you will be in a situation similar to that of the Business Development Bank of Canada, which used to be considered a last resort bank and is now a bank providing supplementary assistance? Are you not afraid the same thing might happen to you?
[English]
Mr. Pierce: We are similar to the Business Development Bank in that we have to achieve cost recovery. That is correct.
When I referred to the FCC acting as a lender of last resort, I did not mean to imply that every client who walks into one of our offices will be offered a loan. That is not the case. I was trying to indicate that because of our specialized expertise in this sector, we are better able to assess the risk of a loan applicant. On occasion we will grant a loan to a loan applicant that a bank or credit union might turn down.
I trust that answers the member's questions.
.1135
[Translation]
Mr. Deshaies: One of the most important aspects in agriculture is the transfer of farms from father to son or daughter. Since there is a great need for capital if agriculture is to survive in Canada, we have to find a way... You have some minor programs for this, but young people do not stay in rural Canada. They do not see how they can buy a farm that is worth $0.5 million or even $1 million. They cannot see how they could get a loan, let alone repay it. When you borrow $1 million, if the repayment is scheduled over 20 years, you end up paying $3 to $4 million. Is there a real will to help these young people?
[English]
Mr. Pierce: Yes, we do. Perhaps I can ask my colleague John van Abbema to expand on that issue.
[Translation]
Mr. John van Abbema (Vice-President, Eastern Region, Farm Credit Corporation): Many young people who wanted to buy their parents' farm came to us. We presently have the family loan, but people are not used to that. It takes a lot of time, and protracted negotiations between notaries, lawyers, accountants, and so on.
In my own region of Quebec and the Maritimes, a major part of our work - some 23 to 25 per cent, actually - is trying to help young farmers through various programs. Whether we can help them depends, among other things, on the price set by the father, the uncle or other parent. If they insist on getting the maximum price, it becomes impossible to do anything. We are ready to take risks in order to help a young farmer start up, but parents also have to be willing to help.
Mr. Deshaies: Farms could sell for as little as 50 or 60 per cent of market value?
Mr. van Abbema: It varies from one family to another. I could not say whether this is a tendency or not, but I have been working in the southern part of the province of Quebec, in the Saint-Jean and Valleyfield areas, and there has been a pattern. Whenever parents insisted on getting the best price, it was extremely difficult to have the son or daughter take over that farm. They could sell for example to immigrants who had enough money to pay the price they wanted to sell for. When there is a good relationship between parents and young people, we are frequently in a position to help.
Mr. Canuel (Matapédia - Matane): How many offices to you have in Quebec?
Mr. van Abbema: I did not check lately, and we are expanding. We have a head office in Sainte-Foy and three district offices, one of which is in Sainte-Foy and will be moved to Lévis, nearer to our clients, one in Sherbrooke, and one in Saint-Hyacinthe. There must be a total of 24 offices.
Mr. Canuel: You told us that the total of your loans last year was $1 billion. What was Quebec's share?
Mr. van Abbema: In the whole eastern region, it would be about $220 million, and probably $150 million in Quebec.
Mr. Canuel: You talked about being a last resort bank. I agree with you that we should help farmers. On the other hand, I can see in one of your first tables that you had a $40 million profit last year. That may not be much on $1 billion in loans, but it is still a lot of money.
I am from the Gaspé peninsula, in the area of Matapédia - Matane. In one given community, we used to have 20 farmers, and there are only three or four left now. When I talk with these people, I ask them how they have been able to sell to other farmers their quotas, their livestock and so on. Would you care to comment? For example, a 50 or 55 years old farmer told me he could not afford to sell his farm to his son for two reasons. When you have worked all your life on a farm and never got much of a salary, you have managed to build a fairly healthy small business. It would be legitimate for these people to get a pension. I agree with you that some parents can make a fairly big gift to their children, but they cannot give everything away, because they sometimes have one or two mortgages on the farm, and they think they deserve an annuity of some kind.
.1140
There are many young people in my area and maybe elsewhere in Canada and in Atlantic Canada who want to go on farming, but they cannot get a loan from the banks. With the FCC, it happens fairly often that a deal cannot be made, because of negotiations and so on. I think some people are being left behind. They could work marvels, but they do not get the opportunity because they cannot get a $50,000 or $100,000 loan.
I know personally people in that situation. I hope they did not lie to me or sell me a bill of goods. But the problem seems to be fairly common. Is there not a way to use some of that $40 million profit to be a bit more generous, even if there may be some losses or a smaller profit? The FCC could even say: We will try to make ends meet; we cannot lose all the time.
These $40 million could have been a big help for young farmers and other people. Each year, farmers go out of business, and it is tragic. There are auctions everywhere. Maybe we could do something about it. I would like to hear your comments on this.
[English]
Mr. Pierce: The hon. member has raised many interesting issues and I will try to address them briefly.
It is true that throughout North America and worldwide, scale economies in agriculture are becoming increasingly important and there is consolidation of farms. That's an economic trend that we can't stop. As a result of the consolidation there are huge capital requirements in terms of acquiring the assets or the quota or the machinery and equipment to run the farm.
What we're trying to do in the Farm Credit Corporation is to be able to have the power to offer instruments to these new and beginning farmers that will enable them to finance the acquisition of these farms or equipment without requiring a huge deposit or a huge collateral. We would like to be able to offer a leasing product that requires less of a down payment and less of a hit on the cashflow in the early years.
When we were talking about the family farm loan product we offer for intergenerational transfer, I did not mean to imply that we're talking about the parents providing a gift to the son or daughter or relative. Generally the farm value is often the pension for the farmer. He's not able to give the land, the farm, to his children, even if he would like to. That's his future economic security.
We've tried to design a product that would insure against the loss of that security and also ensure that there's a regular income flow so that the farmer is able to retire after his many years of working the farm. When we do engage in this intergenerational landing we look at the cashflow of the farm and we try to structure the loan and the repayments to meet that cashflow. So the farm is in a sense refinancing itself when the son, daughter, or relative purchases it.
You mentioned our profitability with respect to the $40 million. We are actually quite proud of being able to achieve growth of an average annual rate of 30% in the competitive market, cover our cost, and still earn a profit.
.1145
That profit is essential for FCC if we are to continue to provide services to our agricultural clients and to grow. When we make a loan to a farmer, we have to go out on international capital markets and borrow that money. That money is supported by the amount of equity that we have in the organization, and the only way FCC is able to get equity is through profits.
The government is not in a position to enhance or make additional equity contributions. If we do not earn a profit, our debt-to-equity ratio will grow, we will incur increased financial risk, and we will be at risk in terms of being able to meet our debt obligations, which we are required to do.
[Translation]
Mr. Canuel: You talked about family farms. I know agronomists coming out of universities and their father is not a farmer. They are saddled with $20,000 in student loans. Even if they have the desire, the will and the courage to do it, there is no way they can buy a farm because of their student loans and also because you will never lend any money to them.
Mr. van Abbema: That is an interesting point. When I said families have to make deals, I did not mean a farm should be given entirely as a gift.
In my own area, one farmer has helped three young people unrelated to him start farming. It has been possible through arrangements between the former owner and these young farmers. First, he hired them. They were paid a salary, but...
Mr. Canuel: That man took the risk, and not your corporation.
Mr. van Abbema: In that case, it is true. This is the reason why we have developed the family loan, to help those who cannot take all the risk.
Mr. Canuel: Yes, but take a farmer who has no family and wants to sell his farm. You will not find too many farmers willing to make arrangements and give their farm away. If you do not lend money, they will just close down, and nothing will be possible after that.
Mr. van Abbema: We do not seem to understand each other here. This is a family farm loan, but it is not restricted to family members.
Mr. Canuel: I see, but a young man with a $20,000 student loan will never be able to make it. You will not lend money to him, because he will not be able to repay. In other words, you do not take great risks. If you make a $40 million profit, you cannot take too many risks.
That means a whole category of people will never be able to farm because banks simply refuse loans. Everybody refuses, and you do too. That is the message I am getting. Tell me if I am wrong, because I can give you quite a few examples.
Mr. van Abbema: Actually, many young people come to us.
[English]
The Chairman: One quick wrap-up comment, because I do have to go on to other members.
[Translation]
Mr. van Abbema: Like I said, there are often arrangements between sellers and buyers.
Mr. Canuel: I will refer some people to you.
Mr. van Abbema: Please do.
[English]
The Chairman: Mrs. Cowling.
Mrs. Cowling (Dauphin - Swan River): Thank you, Mr. Chairman.
As we look at rural economic development, one of the things we are finding is the depopulation factor that is happening in a lot of rural communities across this country. I want to touch base on value-added, diversification, home-based businesses and entrepreneurship, and from a women's perspective, because a lot of entrepreneurs in rural communities are women.
Have you explored the lending options for those particular people?
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Mr. Pierce: FCC, as I tried to indicate, is confined by our legislation, so the prime consideration, if it's not primary agriculture, is whether the enterprise is controlled by a farmer, be it a man or a woman. If that first hurdle is made, then we will evaluate it on its business merits. I'm not sure if I'm fully answering your question.
Mrs. Cowling: No. My question is - and let me use use myself as an example - I'm a farm woman on a farm and I'm looking at exploring the value-added component of what we produce on that farm. I'm wondering if there's access to capital for a person such as me?
Mr. Pierce: Absolutely. Unequivocally. It's all on the merits of the business proposition. Yes.
Mrs. Cowling: That's good. Part of your overheads indicated that you're looking at expanding the mandate of the FCC to the agribusiness sector. Could you expand on that? What would the criteria be to determine if in fact you were an agribusiness, if you were an individual servicing the sector? Could you expand on that?
Mr. Pierce: We are currently able to actually lend beyond the farm gate, as the expression in the industry goes. Where we are limited is that the agribusiness venture has to be controlled by a farmer. It is not sufficient to simply have farm involvement. We are proposing that FCC have the power to lend to agribusinesses as long as it is agricultural related, regardless of what the ownership structure is like. We consider that to be quite secondary. It's the economic activity that we are trying to finance, and if it's agricultural related, we believe we should be able to do it.
The Chairman: Thank you, Ms Cowling.
I have a number of questions to ask, some of them following up from Mr. Canuel's comments. In terms of rural development, to me it's essential that all of the resources we're placing in the Farm Credit Corporation do not duplicate anything else. If it does duplicate something, then as a government from my perspective we're not getting full value for our money.
If the FCC is doing something that the private sector is already doing, we're not getting full value for our money. I want to explore that a little bit, and particularly in regard to one of your comments wherein you said, yes, we do compete directly with banks, which would mean that you are going to book a loan that the bank would book if you didn't. In my mind, if you put $100,000 into a proposition that the Royal Bank would do, for instance, that's $100,000 less for a farmer who isn't bankable with the Royal Bank.
Is there a flaw in my logic?
Mr. Pierce: Rather than respond to whether there's a flaw in the logic, let me provide some context. When we compete with the private sector on occasion, and we do, it's in order to achieve an important part of our mandate, which is cost recovery. We cannot achieve mission impossible by taking all of the high-risk loans, cover all of our costs, and continue the service in an ever-expanding agricultural sector. We have to be able to lend to some high-value clients, and with the profits, the margins, we earn there we're able to cross-subsidize some of our higher-risk lending.
On the issue of duplication and whether the government is getting value for money, I think the issue there is basically what the economists refer to as an economic efficiency question; i.e., if the equity that FCC has is left in the private sector it generates a certain economic return, and studies conducted by the Department of Finance would indicate that is in the neighbourhood of 10%. This equity that's in FCC earns a return of in excess of 10%. So there is a net economic gain to society as a result of FCC operating. This 10% is on a commercial basis after tax rather than before tax, which is a 10% hurdle rate that has been identified.
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I trust that answers your question, Mr. Chair.
The Chairman: Only if I was an economist.
Mr. van Abbema: I was just saying to Max that I could offer a specific example where we appear to be competitive but there was lots of value-added for the individuals involved, if you're interested.
The Chairman: No. I want to go down a different road here.
If I understood the response correctly, basically what you're saying is that in order to pay for the operation of FCC, you will enter into a competitive situation with the private sector to take on those potential private sector loans in order to earn the profit to subsidize the part of your operation that's not profitable, which is a higher risk. That's different from what the Business Development Bank does.
Mr. Pierce: And that is to achieve the implicit requirement to achieve cost recovery.
The Chairman: But the Business Development Bank of Canada has the same mandate of cost recovery and it doesn't approach it that way. If I understand it correctly, and I could be a little confused on this, their approach basically is on the pricing side and saying, if we're going to move off the risk curve and we have to have a cost recovery, what we'll do is move up on the price side, not go into the private sector and get the capital that way. So if I have a deal in front of me and it's not a bankable deal because of the risk, but it makes good public policy to make it, then I'll just price the product accordingly and do cost recovery that way.
Mr. Pierce: That is certainly a viable option to pursue. What happens in that situation is you become a high-cost lender.
One of the things we're trying to achieve is to have a modifying or lowering effect on interest rates for the agricultural farmer. Consequently, when a client, for example, does not borrow from FCC because he's able to negotiate a better interest rate with the bank, that is a win for FCC. We could restrict ourselves just to high-risk lending or high-cost lending. That is not a road that we're following currently.
The Chairman: It's not a question of restricting yourselves to that. My feeling is that the role of FCC is to ensure that there is capital available to those people in rural Canada who are in the agrifood or agricultural business. If the private sector is willing to offer $1 billion and you're willing to offer $500 million, I have $1.5 billion out there. But if they're willing to offer $1 billion and you're willing to offer $500 million, and $100 million of that is the same client, then I only have $1.4 billion out there. I'm short $100 million using your scenario.
If you're in the marketplace as a government agency, it's to make sure there's an incremental increase in the amount of capital that's available for rural development, not to replace the capital that we have from the private sector. I'm having a lot of difficulty. What you're suggesting is it's okay to go in and take the private sector stuff if we end up with getting those farmers who get it from the banks to have better lending conditions, i.e., interest rates and whatever.
Mr. Pierce: If I have, I certainly don't mean to imply that we're there to replace the private sector - anything but. In our view, we complement the private sector.
We ventured into many loans where we have been partners with the banks, the credit unions, and with BDBC. The issue is that we cannot achieve this concept of what I'm calling mission impossible where you are required, say, simply to lend to clients who are not able to obtain financing elsewhere. This is high-risk lending. You'll incur losses. If you incur losses and you don't have any other source of revenue to offset those losses, then you're no longer able to achieve your cost recovery mandate. So we're forced by virtue of the fact that we are not appropriation dependent.... We do not get a subsidy. We do not get a contribution. We borrow our funding on capital markets just like any other financial institution. We have to charge market interest rates. We have to have good loans.
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The Chairman: When you go out in the marketplace to raise your capital, are you getting a preferred rate because of who you are?
Mr. Pierce: We have the credit risk rating of the Government of Canada, which is a triple-A credit rating.
The Chairman: So I suspect that your cost of issuing commercial paper is a little less than that the private sector.
Mr. Pierce: That is absolutely the case with respect to a private sector firm that does not have a triple-A credit rating, but we pass the benefit of these lower costs of funds directly on to our clientele through lower interest rates. It's a pass-through.
The Chairman: I have one last question and then we'll have to go on to our next witness.
There was some discussion at one point in time - taking a look at your revised mandate - that you would have a much broader definition of what would constitute an appropriate area for you to lend in. In other words, if there was an industry that supported a community that was agricultural in nature, but the entity itself was not necessarily agricultural driven, it would fall within your mandate. Is that still on the table or has that been set aside?
Mr. Pierce: We try to consult with our clients. We've consulted more than 100 agricultural organizations, and our clientele told us that would not be appropriate, that we should restrict our lending practices simply to agriculture-related enterprises. We've agreed with that and we are no longer searching for that broader mandate.
The Chairman: How about the power to attract retail deposits as a means of getting lending capital?
Mr. Pierce: I really find it difficult sometimes when my colleagues in the financial industry, through innuendo and misinformation, imply that the Farm Credit Corporation is taking deposits. We do not take savings accounts, we do not have chequing accounts, nor are we searching for the ability to do that.
The Chairman: I know you don't do all of those things now.
Thank you. We'll go on to our second witness. We appreciate the opportunity of having you here. I think I could say on behalf of the committee that we certainly appreciate the fact that you're providing this capital into our rural areas. We would like to see it maximized, so there's the most value added to the fact that you're in that marketplace.
I'd like to call David Allen, from Inco, to come forward. I would ask you to make an opening comment and then we'll turn it over to the committee for questions.
Mr. David Allen (Vice-President, Public and Government Affairs, Inco Limited): I'm here at the committee's request to talk about Voisey Bay, which is the largest natural resource development currently under way in Canada and is on the coast of Labrador.
I submitted to the clerk a number of documents. The large one is an environmental assessment report filed with the government late in September. I hope you have this document of three or four pages; I'll skip through it. I've left some videos with the clerk if anybody wants to have a vicarious visit to the site.
This is a mineral resource that was discovered in 1993 by two Newfoundland prospectors who were working for a company called Diamond Fields Resources. In June 1995 Inco purchased a 25% interest in it and subsequently, in August 1996, took it over completely at a cost of approximately $4.3 billion.
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The project site is in northern Labrador, 35 kilometres southwest of Nain, 79 kilometres northwest of what some of you may know as Davis Inlet, which is in the process of being relocated, and 330 kilometres north-northwest of Happy Valley-Goose Bay. Access currently is by helicopter and float plane, and partly by ship. There's no road, rail or other access.
The metals in the ore body for sure are nickel, copper and cobalt. We know for a fact now there are about 150 million metric tonnes of proven and probable reserves. We are spending about $20 million a year for the next four years minimum to delineate that resource to make the mining more efficient.
I think it's important you understand that at the site in Voisey Bay where the ore body is there will be a mine, initially a surface mine. In seven or eight years underground mining would commence, and a mill. A mill grinds up the ore into a sand-like material that's called a concentrate. At some other location within the province will be a smelter and a refinery that will take that concentrate, smelt it, separate the streams of ore, and then refine it to a high purity that goes to the market.
The mill initially will operate at the rate of 15,000 metric tonnes of ore a day. We're in the construction stage at the mine mill location, and that's all I can talk about today because we have not determined the location of the smelter and refinery. We probably will in about three weeks. We had a series of public hearings. We thought we knew what we were going to do, but some people in Labrador raised some good questions. We sent our main engineering company on that, Bechtel Canada, back to do some more work, and we would hope late this month or early in November to announce the location of the smelter and refinery.
The mine and mill site will employ 700 people in construction initially and then another 500 ongoing to operate it. I'll say, as an aside, that the smelter-refinery will be about of the same magnitude, so you'll be looking at between 1,500 and 2,000 construction jobs for three or four years, then ongoing 1,000 to 1,200 regular, high-paying jobs. Mining is consistently the highest-paid sector in the Canadian economy.
We expect to have concentrate production from the mill in the year 2000, if not a little bit sooner. We have an open pit surface mine that will be in operation for approximately seven years, depending on the market conditions and how fast we extract it. Then it will move underground. There's a map attached to this if that's helpful to anybody, and the other material I've left. I'd be glad to answer any questions.
The Chairman: Thank you, Mr. Allen.
Mr. Canuel.
[Translation]
Mr. Canuel: You have been consulting. Usually, 20 years of mining represent a good deal of work. But, concerning the environment, have all the safeguards been put in place? Will standards be met? Will this create problems for groups that are more sensitive to the environment?
I know you have been investigating the wildlife issue. Will the wildlife be protected? Are you sure it will be? What kind of relations do you have with native people? Do they think their environment will be damaged or even destroyed? Where do you stand on these issues?
[English]
Mr. Allen: Certainly. Twenty years is the minimum. We have been mining for 100 years in Sudbury, and we have 30 or 40 more years at a minimum. We know we have 20 years, and we believe there is much, much more. Sudbury currently produces about 200 million pounds of nickel and the same amount of copper. At its start-up Voisey Bay will produce 270 million pounds of nickel, this project...its entirety, about the same amount of copper, and 10 million pounds of cobalt.
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As the winter sets in, we are bringing to completion what we believe is the most thorough, complete environmental baseline study done anywhere in the world, ever, by anybody. That's what our consultants are telling us. We have spent many millions of dollars quite literally counting wild flowers, monitoring fish, tracking the caribou herd, watching the fishery, watching where we will move ships. That's not complete yet, but we believe we can operate in the most environmentally inoffensive way of any project of this size in the world, because we will have the advantage from day one of state-of-the-art technology in mining, smelting and refining.
We will try to close all of our processes so that - I'll use water as an example - we don't put water back outside our process that isn't better than when we took it in.
Rehabilitation of the land is very important in terms of a surface mine. Obviously, when it's mined out there is a hole in the ground. Our stated policy, on Inco's own, wherever we operate in the world, is to restore the land to its original state when we're finished with it. This would be an ongoing process.
The open pit, the surface mine, is the most visible sign of economic activity there. An underground mine leaves a very small footprint on the land because you have a shaft going deep and then you're underground. You're not disturbing the surface very much. In any case, we would restore it. If any member of the committee wants to look at our rehabilitation and restoration in Ontario or Manitoba, or Indonesia or Wales, I'd be glad to get some material or show it to you first-hand.
In terms of the aboriginals, there are overlapping land claims in this area by both the Innu and the Inuit, the Inuit being the larger group of perhaps 4,000 or 5,000, the Innu being less than half that size. The land claims are currently being negotiated with the governments. Parallel to that, we are negotiating with both groups memoranda of understanding setting out how the whole project will be developed and the benefits that will accrue to the aboriginal groups in terms of employment, basic payments to them, education, scholarships - all manner of things - joint environmental policing as it proceeds.
The Chairman: Mr. Chatters.
Mr. Chatters (Athabasca): I have a couple of questions. Why does the site of the smelter and refinery necessarily have to be different from the mine? Why did you choose not to develop the entire process there since you will have access to ocean-going vessels at the site? Why is it necessary to move somewhere else?
Mr. Allen: We haven't made that final decision. Initially we were looking there and elsewhere. It's one of a number of studies we took.
Yes, we have ocean access, but only for perhaps five months. When the mill is producing 15,000 metric tonnes a day, it provides a huge stockpile if you can't move it for seven or eight months. We would be looking to move a lot of material during the summer months if another site is chosen and then stockpile some of it for the winter.
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Mr. Chatters: It would seem to make sense to me to reduce the amount of material to be moved to its most concentrated form, therefore cutting down considerably on your transportation costs.
Mr. Allen: There are a number of other considerations, including the perennial problem of electricity in Newfoundland and Churchill Falls and the province's ability to supply power to any site we end up picking. Presently there is not sufficient power anywhere near Voisey Bay to run two operations, both of which will take approximately 200 megawatts to run.
It's probably more the year-round shipping route that's necessary. A by-product of smelting this kind of ore is a huge amount of sulphur products, acids and gases, and you don't want to be in the position of storing that in huge amounts. The cost is prohibitive. The straits of Labrador is also a very risky area for shipping because of icebergs, even in the summer, and that's a consideration as well.
There's a number of considerations, and as I said, we're fairly close to the decision on location, but we're not there yet.
Mr. Chatters: Would your company consider entering into some kind of a community royalty plan for the local residents? This concept of a kind of royalty sharing or community royalty is one that seems to be getting a lot of attention everywhere these days with aboriginal peoples and resource development.
Mr. Allen: We have publicly promised to maximize the economic benefit for the people closest to the site, and that's probably 500 or 600 people, mostly Innu. They will benefit by way of the royalties and other things.
Mr. Chatters: Will they receive direct royalties from every pound of ore that's produced?
Mr. Allen: We haven't settled on the formula yet, but there are other formulas you could easily look at. There are revenue streams that go not to individuals but to the Innu First Nation in that case or to the Labrador Inuit Association in the Inuit as the organization that represents those two groups.
Mr. Chatters: There's a really substantial difference between a share of the resource royalty that traditionally would go to the province for development and those royalties going directly to a community group.
Mr. Allen: We will be paying royalties to the province, of course, as well as to aboriginal groups. In Sudbury, for example, we pay royalties and taxes to all levels of government. We don't pay our neighbours a royalty just because they live close by.
I'm aware of the concept you speak to; however, in this case there are no people close by who aren't covered by the Inuit association status or the Innu association first nation groups. They're both members of those groups. Non-aboriginal people by and large don't exist on the coast. The largest concentration of them is in Goose Bay.
I should tell you that we will operate this as a fly-in mine. People will be flown in for a week or two to work and then flown out. We will not build a community on the coast. It's prohibitive to do that. We will only fly people from Goose Bay. We will build an airstrip and have a commercial-sized airstrip and we will be flying our workforce in and out of Goose Bay. We will make some accommodations with the community of Goose Bay, we hope, so that when we are ready to go, there is the infrastructure there to support another 500 or 600 families, schools and hospitals and those kinds of things. There aren't any there now.
Mr. Chatters: How will that apply to the local aboriginal communities along the coast? How do they fit into that picture of employment and getting back and forth to work?
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Mr. Allen: Those who can get back and forth will be employed. They are used to travelling long distances in extreme weather. Whether they choose to work in this environment is another issue completely. We would accommodate anybody who currently lives near the site with employment to the extent we can.
We have a tremendous task ahead of us, as do governments at both levels, in bringing the workforce up to a position where the aboriginals in particular are able to be employed by these. Our average cost of a miner in Ontario now is $80,000 a year. We pay very good money for a workforce. We now do not hire anybody without a technology background, at least at the community college level. You can't be big and strong, like I used to be, and walk in the door and get a job. You have to come with some papers.
We are very close to having mines that are fully automated, that don't have people in them. We have the technology and ability to do that. You can sit in a suit at a console on the surface and run mining equipment underground, as the Prime Minister did one day in Sudbury. So we require different people.
We need to bring particularly the aboriginals' basic literacy higher. We need to get people who are willing and able to learn as they go along but who come with some technical knowledge, or it's not going to work for them or for us.
We spend a lot of money on training and retraining in Sudbury. We design curriculum courses at the community college. We all but guarantee people employment if they take the requisite courses. We're now making the rounds of federal and provincial governments to discuss the roles of local community colleges and others, Memorial University and others, in that. I have a list, unfortunately, of fourteen different federal agencies alone I have to try to visit in the next few days.
The Chairman: Mr. O'Brien.
Mr. O'Brien (Labrador): Thank you, Mr. Chair.
Mr. Allen, I'm Lawrence O'Brien. I'm the MP for Labrador.
Mr. Allen: I've heard you on the radio. It's nice to meet you.
Mr. O'Brien: Thank you. Likewise.
I'm going to try to walk through this, if you would bear with me, Mr. Chairman.
The Chairman: Briefly, Mr. O'Brien.
Mr. O'Brien: How brief?
The Chairman: Brief.
Mr. O'Brien: Brief like what? Two minutes? Ten minutes?
The Chairman: Two or three minutes.
Mr. O'Brien: Okay. That's not going to do much justice.
The Chairman: No, this is for your opening comments. You can go back and forth with questions.
Mr. O'Brien: Okay.
I heard your comments some time ago vis-à-vis statements you made to the media. I have copies of that article. It caused some concern and some commotion in Labrador, and I guess it caused some unsettling moments for Voisey's Bay Nickel people as well. What you said at that point might be as true as anything else that has emanated since then. That was primarily on the issue of the smelter.
Before I go into the smelter...or discussion on the mine and mill, I want to say to the committee and to you that the people of Labrador, as you would expect with anything new, have a lot of concerns. I think the company has to be very considerate of their considerations and their views, particularly as you relate to the Inuit in Nain and Hopedale, the Labrador Inuit Association, certainly the Innu, and Labrador generally, as you would expect.
Goose Bay, as the committee saw last week if you had a minute or two to get around town, is a growing community. Dave, you were there last year and you saw it. It's a growing community. I sometimes ask myself, do communities grow in spite of themselves?
We have two things happening. The base is being privatized and it seems like there's a downswing in the jobs, but people are still going forth and building new homes in leaps and bounds. I'm assuming they're building them on the strength of the point you made here a minute ago. If Goose Bay is the staging point for Voisey Bay, I can see some future for it. I hope you're right, and I think you meant it when you said it, but it is very important to Labrador that a place in Labrador be the staging point for the mine and mill site and not some place in Newfoundland or Quebec or some other part of Canada. That's a very important point.
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I'll leave it at that. I have a few questions, Mr. Chairman, on the mine and the mill.
There are a few possible perspectives here. The people of Labrador right now are going through a transition period from Archean Resources Ltd. to Voisey's Bay Nickel. Within the next month Archean is out, Voisey's Bay Nickel is in. I have 84 names in my office of Labrador people from a total of over 300. I'm not concerned about East Coast Catering, because that's Torngait Services, which is a locally owned company - no problem. I am very concerned at this point about the local people getting the word on jobs.
I can tell you so far it's not looking the best. There is a guy, for example, who was a mechanic at the site and he has now taken over as the camp supervisor, and he's not from Labrador. The guy from Labrador who was the camp supervisor does another guy's job.
So you see, we fought with Mr. Sopco very hard, and we gave him some very good perspectives when he was in Goose Bay in June. We wanted Archean out because they weren't looking after the best interests of the people adjacent to the resource, i.e., Labrador. We said, Mr. Sopco, please change that.
We'd like to think that as a result of our interventions Inco made a decision partly based on the wishes of the people of Labrador. But if what we think is happening is actually happening, we are probably going to be more disappointed in a month's time than we are right now. That's a concern of ours.
We'd like to see some protection for the people adjacent, for the people in Labrador, and we'd like you to do it soon. We don't like them to be downgraded in their jobs; if anything, we'd like them, based on the training they received from Archean, to be upgraded.
I don't know how you want to respond to that.
Mr. Allen: I think the committee should know that Archean Resources is the company that discovered the ore body under contract to Diamond Fields Resources. Archean was drilling furiously, but at a certain stage their contract was terminated by Diamond Fields. They were given six months time to close down, six months being up at the end of January. Inco and Voisey's Bay Nickel will do less exploration; we don't need the proof there's more ore there now; we know there's enough for, as I said, 20 plus years. When Diamond Fields and Archean were in charge, they were drilling everywhere they could because they were interested in promoting the project to raise money for it. Every new drill result was announced with drum results and everything else; it was a promotion effort. We're not interested in promoting exploration in that sense. We're delineating the resource, trying to prove how to mine and mill and process it in the best way we can.
There will be fewer jobs because we are changing the nature of exploration. We will have fewer drill rigs in the area, so that will amount to fewer people. But as the thing gears up, and as we clear the various hurdles on environmental controls and other things, the construction will start and there will be 700 jobs, as I said. But there are going to be some gaps, and one will probably be this winter when fewer people will be employed in the location.
You mentioned entrepreneurs, and I want to say that my chairman, Dr. Sopco, has met with people in Goose Bay twice. There is a large group from the Goose Bay Chamber of Commerce, I believe, attending a conference this week in Thunder Bay. And then they're coming to see us in Sudbury, where we have arranged meetings for them to in effect talk to every supplier we have around Sudbury. We will host things and squire them about. But we're very anxious to promote entrepreneurship in Goose Bay-Happy Valley and in Labrador generally.
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Mr. O'Brien: You haven't answered my question. I want to know, all things being equal, when it's the people from Labrador versus the people from Newfoundland and elsewhere, who gets priority? I want to know. That's my riding, it's my people and it's our resource. You have to answer my question.
Mr. Allen: We have said many times - I have said it, you have heard me, you have spoken to the chairman and he has said the same thing - local people will get the maximum benefit. We're determined that will happen.
We don't have many jobs to offer right now. When construction starts, we'll have more jobs. When mining starts and milling starts, we will have 500 high-paying jobs. Newfoundland will become, all but overnight, a have province because of this project. But it can't happen tomorrow. We won't have the jobs tomorrow.
I will say that we are also obliged to obey the law, and we are not obliged or required to discriminate in who we hire. It will be our policy to try to hire, in an outer ring from the site, initially the people who live here, then the people who live a little farther and then the people who live a little farther still. It's in our interest to do that.
We are trying to maximize the benefit to Labrador and to the province, but we can't put a sign on the employment office that says only Labradorians, Innu or Inuit can apply, and I don't think you would want that, quite frankly. It is our policy to employ and to source supplies as close as we can. It's to our advantage to do that economically, socially and in all other ways.
Mr. O'Brien: That brings me to the point of the sentiments in Labrador right now. I could get into the questions of tailings, dust from tailings, structure, modules being built elsewhere, dragged in on a barge and moved up, minimizing the jobs in Labrador.
You see, we're really scared at this point. We're very optimistic, but at the same time we're really scared. We're getting vagueness from Inco. We're getting vagueness, in terms of response, from Voisey's Bay Nickel. We're getting sort of sheltered in the responses.
I'm hearing it all over now, from the south to the north, to the central area, to the west. I just travelled in Labrador for two weeks, and it's a major concern and becoming even more of a concern as we reach the point of decision vis-à-vis the smelter.
The people of Labrador have two views about Inco and Voisey's Bay Nickel. There's the view of some businesses and then there are the views of the rest of the people. The business view is, as you pointed out, going to Sudbury and there's the rest of it....
I saw your policy that said aboriginals, the rest of Labrador, Newfoundland, and the rest of Canada. I saw that policy, as you pointed out, but I think very soon you're going to have to try to put some proof to that policy.
Mr. Allen: If you look at the people we employ in St. John's now, including our executives -
Mr. O'Brien: There's not one from Labrador.
Mr. Allen: No, but more than half of them are from Atlantic Canada.
Mr. O'Brien: I'm not buying that, sir. You heard about the adjacency issue and you said you were getting on the adjacency issue. I have to do what the people have asked me to do, you know. I'm here to represent 33,000 souls, 18,000 voters, and I plan to do that. You have not hired a single person from Labrador in a management position. You have not put an office and had -
Mr. Allen: That is not correct.
Mr. O'Brien: Tell me who it is, then. Who have you hired?
Mr. Allen: I can't list names, I'm afraid.
Mr. O'Brien: You have two people to name.
Mr. Allen: No. We have people working in St. John's from Labrador - Inuit. I know who we have, sir.
Mr. O'Brien: Are they in management positions?
Mr. Allen: Yes, they're in middle management. We weren't aware, when we were hiring the senior people to start with, of.... If you can show me anybody with parallel experience and qualifications to the president of Voisey's Bay Nickel, we'd like to see that person. He has a PhD from Dartmouth, I think, and he grew up in Halifax. We are very careful in our employment decisions, and we went out of our way to find in our organization, and to hire outside, people from your province.
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Mr. O'Brien: Sir, that's fair. Stew Gendron came from Sudbury. I understand that and I have no problem with that whatsoever. Let me use another example, and I don't mind saying the name - you don't have to. It's Herb Clarke, who's in charge of aboriginal affairs, corporate affairs.
I spent 15 years writing native agreements, managing native agreements, working with these people full-time. I was out of a job on December 11, as an example. I was director of native, northern and aboriginal business and the whole works. The people of Labrador saw enough in me to elect me as their member of Parliament. I went to your company looking for a similar type of job. I got thumbs down. I'm from Labrador, fifth generation. That's the way you treat the people of Labrador versus people from outside.
It's an important issue and it's a big one in Labrador. We need some priority. It's an adjacent resource, it's a resource in Labrador. It doesn't happen anywhere else. You have offices in Sudbury and in Thompson, but you have very little in terms of offices in Labrador. You will not commit to it.
I don't want to be negative, I want to be positive, but we need a partnership between the people of Labrador and this joint called Inco. Can you understand that? That's what I'm asking for. I need you to come clean, talk above board and be rational so we can have trust between us and you. That's an important point.
The Chairman: Mr. O'Brien, thank you very much. I'm going to let Mr. Allen respond to that.
Mr. O'Brien: Okay.
Mr. Allen: I can't possibly speak to your own employment situation. It was not until you mentioned it that I was aware of it. I don't know anything about it. If you want I'll find out.
Mr. O'Brien: It might be important in the next election, I don't know.
Mr. Allen: But generally speaking, I can't say much more than you know about what our public commitment is. We haven't hired a whole lot of people in Labrador yet because we don't have a whole lot of jobs in Labrador yet. I can't go beyond that.
The Chairman: I'm just going to ask a couple of follow-up questions. I'm going to put it in a much broader context, and I guess I'm able to do that, not being from Labrador.
Does the company recognize that in developing the Voisey Bay project it has a social responsibility that goes beyond the economic decisions you may undertake as a company?
Mr. Allen: Without question.
The Chairman: Okay. Do you have a specific strategy developed or being developed that can be shared with the community that will demonstrate your exercising that social responsibility in the development of that natural resource?
Mr. Allen: We have spent the most part of every day for the last year in hard bargaining with the aboriginal groups that includes all of that. The memorandums of understanding will enshrine our social responsibilities, as you refer to them, in a contractual kind of form. We will contract to spend this much on education, this much on health, and this much on community development and a variety of projects like that. I'll stop there.
The Chairman: So there will in fact be some sort of agreement or documentation that the community will be able to turn toward that says, this is Inco's commitment to the people of Labrador by our company that reflects our social responsibility in developing this natural resource. There could be an instance where you would enter into a decision that might not be the most economic from the company perspective, but which you are taking because you recognize the social responsibility that comes from the harvesting of that natural resource in Labrador.
Mr. Allen: Again, that's without question. We have already taken decisions exactly like that. They may not make the best sense from a purely economic bottom-line view, but we've made decisions to impact as much as we can on the province.
The Chairman: I have just one last comment before I adjourn. Being an outsider and having travelled to Labrador - granted, I was only there for a day in the community we saw at that hearing, and again it's a very small slice and I don't know if it's representative - I would suggest the company has a need to communicate what you've just communicated to me in a way that the people of Labrador will be able to understand what you're saying.
The message we received - and the committee members who were there will probably agree with me - was that they have no idea how they're going to be able to see the advantage of this. They haven't heard how this is going to impact their lives and they haven't heard how this is going to add to the wealth of Labrador. I'm really pleased to hear that your company has that commitment to do all those things, but I think there needs to be a little bit more communication to the people of Labrador so that they understand it as well.
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Mr. Allen: I don't disagree with that and I would enthusiastically support it. I would say, however, that we've had literally dozens of meetings in Labrador. Within the past three weeks we've had a series of hearings on the location of processing facilities in four different communities in Labrador. We maintain a permanent information office in Nain. We publish newspapers and other material.
I agree that it's not enough. It's difficult to explain a concept that's not there yet. What we have is an ore body that we know is going to work. The people are not familiar with what a mill does or what an underground operation does or what a smelter does and what it requires in terms of property and power and a technically qualified workforce.
Our request to people in Labrador in positions of influence and authority and in both levels of government would be to help us develop the workforce. I know there's a lot of effort around, but I must say that even for a company the size of Inco, it's very difficult to find out who's going to do what because of overlapping jurisdictions. As I've said, I think I have 14 federal departments and agencies and about 20 members of Parliament on a list of people we should just drop in on, let alone try to apply to for help.
The Chairman: In closing, this is beyond Voisey Bay and Labrador. This is an important issue for this committee to study, because one of the key things we are trying to develop is how we can harvest our natural resources in a way that provides the best economic advantage to rural Canada. Voisey Bay is probably the largest and the next project in that respect, and that's why the committee has highlighted this.
I really appreciate the fact that on relatively short notice you made the effort to come and talk to us and add us on to your list of 14 departments and 20 MPs. I know it's not an easy task. The committee does appreciate the fact that you have taken the time to provide this testimony, Mr Allen.
Mr. Allen: It's a pleasure. Thank you very much.
The Chairman: The committee stands adjourned until Thursday at 11 a.m.