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Quebec, do not make a terrible mistake!

This email was sent to us Thursday April 11,2013. We believe that it merits investors’ attention, particularly in Quebec! This site has US, European and Asian readers whose comments and thoughts we value greatly.

To the Canadian Mine Analysis group,
As an investor in mining stocks for over thirty years, I wish to offer some comments on the proposed introduction of a new mining tax and increasing royalties on the Quebec mining industry. In the past, Quebec has done so much to stimulate and develop a solid and potentially large mining industry so I am hopeful that its leadership will do nothing that would endanger its success.

Quebec is not a giant mining area although it could be if the government doesn’t interfere, it is today a mining jewel. Many investors were quite impressed several years ago when Quebec was rated as the world’s best location for mining by the Fraser Institute. But recently I read that Quebec has dropped from the Fraser Institute’s number one world region for mining to number eleven which is a huge decline. If the Quebec government decides to raise the tax rates and increase the royalties, it will probably drop further, lose investment capital and probably see a loss of jobs in the mining industries. In my opinion, it would have grave consequences for Quebec mining.

That could suggest that Fraser’s present one through ten locations could soon be attracting funds that could be destined for Quebec. The province of Quebec cannot build the industry only with flow through investors to achieve its potential. As a US citizen, I do not benefit from flow through investments and neither do other non-Canadian investors so we must invest for a region’s mining merits and exploration and mining potential. The bottom line is that Quebec, just like other world regions, needs investments from foreign investors as well as large amounts of international institutional capital to achieve its full potential.

I ask the Quebec political leaders to merely look at the states of Illinois, New York, New Jersey and California. Their moronic leaders have created economic catastrophes in those states. Those four high tax states have lost jobs over the last several years and will continue to struggle. Jobs have fled those states for lower tax states. Look at Quebec’s next door neighbor of New York. West of Albany remains in a job decline for years despite what the TV ads may say. A recent sad example is one upstate New York town is losing a 130 job factory to low tax Oklahoma. It could devastate that town of 1200 residents. The reason? High tax rates! It is more beneficial to move the business out to lower tax locations.

Keep in mind that investment dollars move to where they are treated best and lower tax rates enable higher returns and thus attract investment capital. Quebec is competing and is in a struggle with other mining areas such as Ontario, Manitoba, Alberta, Nevada and Mexico among many other regions. It’s a brutal competition and I do not want Quebec to lose.

Investors that I collaborate with and speak to still have a favorable opinion of Quebec, but we are thinking of focusing elsewhere since a serious uncertainty is now present in Quebec and investors do not like uncertainty. We invest in the potential of mining companies and we truly prefer to invest in a neighbor that is politically stable and often a short drive away, so Quebec fits our needs. It would be a tragedy for the politicians to destroy it and they are capable of doing it now.

The investing world is watching closely what happens in Quebec, I strongly and humbly advise you to not give them any reason to consider other mining regions over Quebec. The Belle Province offers so much potential for investors and its citizens and I want it to continue. I would think that if the tax rates are raised, Quebec mining could end up losing jobs and economic growth. It is a chance that Quebec should not take.

Why am I an American emailing Canadian Mine Analysis site? For decades I invested in Canada with many of my business associates. My mother was born in Ontario and I still have relatives in Canada. I wish to continue to invest in Quebec, but I want to see a stable mining industry not burdened by high taxes which would be a growth and jobs killer. Today Quebec is running on three cylinders, it should be able to get back to eight cylinders. Mining investment is a very high risk business so people must understand that some enticements are required. Higher tax rates will only chase investment dollars away.

I am a retired chemist and a former CEO of a chemical company so I am to some extent familiar with how the investment business world operates and thinks. Do what is best for Quebec and that is not to raise tax rates and chase investment dollars away. I am not trying to tell Quebec what to do; rather, I do not want Quebec to make the same mistake many other places have made. They have created disasters for themselves. Sincerely and thank you for your time. William Lehr, private investor, South Carolina.

 

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