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Glencore-Teck deal reveals the irony of coal: Profitable and vital, yet endlessly shunned

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From the MacDonald Laurier Institute

By Heather Exner-Pirot

Coal is not going anywhere, and while some countries will benefit, Canada will not be among them

In many ways, the US$8.9-billion deal Glencore has struck for Teck Resources’ coal assets represents an elegant split that plays to each company’s strengths.

Teck, the Canadian miner, can now focus on its core base metals business, in particular copper, as it bets on strong returns in the years to come. Swiss commodities giant Glencore can build up its coal empire, adding the steelmaking coal assets to its vast thermal coal trade.

But the deal also reveals how coal has its own set of rules. Despite how profitable and strategic Teck’s coal resources are, they will soon come under foreign control. It is hard to imagine this unfolding the same way for any other commodity.

Coal is an essential, ubiquitous material. It is the workhorse of the global power sector, accounting for more than a third of global electricity generation. And it is indispensable in steelmaking. The burning of coke, a coal-based fuel, produces the carbon monoxide needed to convert iron ore into a liquid, alongside high temperatures. The majority of steel in the world is made with coking coal, also known as metallurgical coal.

Owing to its carbon intensity, it has a terrible reputation. Investors and shareholders, not to mention Western governments, shun it. Teck’s intention to spin off its coal business is linked to shareholder desires to see a decoupling of its metals and coal businesses out of environmental concerns, which have weighed on its valuation. Even as it pursues Teck’s coal assets, Glencore is doing the same; it plans to separate its metals and coal businesses within two years and sought Teck’s premium steelmaking coal to make its other coal holdings more palatable.

But shareholder distaste for coal is increasingly divorced from its economics. Coal is still highly profitable. Last year witnessed high prices and record demand, in part owing to the fallout from the Russian invasion of Ukraine. Both Teck and Glencore benefited greatly. Teck earned record profits of $4.9-billion, with coal accounting for 75 per cent of that. Glencore’s core profit rose 60 per cent to a record US$34.1-billion, more than half of which came from coal production.

Teck’s steelmaking coal assets in B.C.’s Elk Valley are world-class – high-quality, with decades of reserves and a low carbon intensity relative to other deposits. Glencore’s deal for them will see it partnering with Japan’s Nippon Steel and South Korea’s PISCO, who will take minority stakes. The fact that the deal includes two of the world’s biggest steel producers is evidence that these coal assets have long-term customers. This deal is not about Teck unloading a bad asset; it is about removing the ESG noose around its neck.

That’s poor justification for letting such vital assets end up in foreign hands. Yet the federal government will likely let the deal happen.

Federal scrutiny of foreign investment and takeovers in our domestic mining sector has grown of late, as the need for friendly sources of critical minerals grows. As The Globe and Mail reported last month, Canadian firms have mainly been the targets, rather than pursuers, of acquisitions in the sector in the past decade. Canada has toughened the Investment Canada Act as a result.

While the Teck-Glencore deal will raise similar concerns, it has been designed to skirt them. Teck’s news release could have been written by Ottawa. It aligns with the federal government’s recent Critical Minerals Strategy and commits to remaining a Canadian-based miner focused on “future-oriented metals,” “an electric vehicle battery recycling facility” and support for “junior Canadian mining and exploration companies.” It also preserves B.C.’s coal mining jobs and revenues.

There’s a parallel universe where a G7 country protects its most exquisite metallurgical coal deposit, required to produce a critical material for any advanced economy, energy system or military. That introduces policy to reshore and build up its domestic steel industry in an era of growing geopolitical turbulence.

The world in 2023 is not this place. And Canada is not that G7 country. Indeed, the world view of the current federal and B.C. governments sees the decline of coal as both imminent and necessary. There is no way they will make the argument that the material is a strategic resource that must remain under Canadian ownership.

But coal is not going anywhere. Some countries will benefit, economically and strategically, from controlling it. Canada will not be among them.

Heather Exner-Pirot is the director of energy, natural resources and environment at the Macdonald-Laurier Institute.

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Tax Freedom Day – Canadian families face larger tax burden than last year

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From the Fraser Institute

By Grady Munro and Jake Fuss

According to a recent poll, nearly half of all Canadians are living paycheque to paycheque. While inflation has cooled and the steep growth in grocery prices has abated, taxes remain the single largest expense for Canadian families, and their tax bill continues to rise.

Canadians pay many different taxes and it can be hard to know how much you pay in total. We pay income taxes, sales taxes, health taxes, payroll taxes, property taxes and many others as part of our total tax bill. But while some of these taxes are visible—for example, you can check your income tax return to see how much you pay in personal income taxes—many others are hidden.

To help Canadians understand how much they pay in taxes, each year the Fraser Institute calculates Tax Freedom Day—the day of the year when the average Canadian family has earned enough money to pay all taxes levied by the federal, provincial and local governments. In other words, if Canadians were required to pay all their taxes up front, each and every dollar they earned prior to Tax Freedom Day would be paid to the government.

In 2024, the average Canadian family (two or more people) earning $147,570 will pay an estimated $65,766 in total taxes—or 44.6 per cent of its income. So, if you paid all your taxes for 2024 up front, you would pay the government every dollar you earned until June 13. After working the first 164 days of the year for the government, you now get to work for yourself.

Arriving on June 13, this year’s Tax Freedom Day comes one day later than last year—meaning the average Canadian family must work one day extra to pay off its total tax bill—because while the average family saw its income rise by 3.1 per cent, its total tax bill rose by 3.9 per cent.

And all signs point to rising taxes in the future.

This year the federal government expects to run a $39.8 billion deficit. Moreover, cumulative provincial deficits are projected to equal $30.1 billion, meaning total federal/provincial government debt is expected to increase by $69.9 billion in 2024/25. Future generations of Canadians will undoubtedly face tax increases to pay off this debt and few governments are demonstrating any fiscal restraint. Several governments (notably the federal government) have no plans to balance their budgets in the foreseeable future.

To help illustrate the size of the debt burden we’re passing on, we also calculate a Balanced Budget Tax Freedom Day, which reveals the hypothetical tax burden on Canadians if governments across the country had to raise taxes today to balance their budgets. This year, Balanced Budget Tax Freedom Day would arrive on June 23—10 days later than Tax Freedom Day.

With Tax Freedom Day falling one day later than last year, the burden of taxation is increasing for Canadian families. Unfortunately, governments are demonstrating little to no fiscal restraint, meaning Tax Freedom Day will likely arrive later in years to come.

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Inner city shoplifting and Manitoba Premier Wab Kinew

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From the Frontier Centre for Public Policy

By Brian Giesbrecht

This problem is only made worse by gullible writers and politicians who make excuses for the thieves. Their excuse is that these people are disadvantaged, so they are less than fully responsible for their criminal conduct. Some sympathetic souls go even further, and suggest that these indigenous shoplifters are simply taking back what is rightfully theirs as “reparations” because the shop owners are on “stolen land”.

Winnipeg, Manitoba is being hit with an epidemic of shoplifting that appears to be out of control. Thieves openly steal expensive items, such as frozen meat, from inner city food stores. Shelves are stripped bare in what are more accurately described as robberies than shoplifting. Victims describe brazen thefts by entitled thieves who become indignant when caught in the act. One store employee, who tried to stop a theft, was told “You are on Treaty 1 territory”. The stores that are hardest hit are often owned by immigrant families who have worked very hard to build their modest businesses. Some have had to close, as a result of the unchecked criminality, and others will follow.

Police protection is weak. Even in rare cases where culprits are caught and prosecuted, sentences are minimal.

The problem of brazen theft from Winnipeg liquor stores reached such a serious level in the recent past that customers at urban liquor stores in Manitoba are now allowed to enter the store only after lining up single file, and producing identification. Liquor prices have risen as a result, because special government employees must be hired to sit at the door to inspect ID’s. Customers must line up outside, even on the coldest winter days, because freeloaders choose to steal liquor. And everyone – including the police – are too shy to confront the robbers.

Other western cities, such as Regina, Saskatoon and Thunder Bay are having similar problems. Even small cities, such as Wetaskiwin, Alberta, are hard hit.

The common element is that all of these cities and towns have significant indigenous populations who migrated to the cities from largely dysfunctional reserves, where attitudes of dependency, entitlement and victimhood prevail. Most arrive poorly educated, with few job skills, but with an expectation that they will be provided for. They proceed to live rough lives on the mean streets of these cities. Many drift to shoplifting and other crime. The inner city thieves are disproportionately from this demographic.

This problem is only made worse by gullible writers and politicians who make excuses for the thieves. Their excuse is that these people are disadvantaged, so they are less than fully responsible for their criminal conduct. Some sympathetic souls go even further, and suggest that these indigenous shoplifters are simply taking back what is rightfully theirs as “reparations” because the shop owners are on “stolen land”. They argue that these indigenous people are victims of a system that gives them no chance to succeed, or that they are suffering from the “intergenerational trauma” presumably caused by the fact that 1 in 6 indigenous children attended residential schools in the past.

The shoplifters readily adopt these excuses, and claim to be victims of “systemic racism”.

But, wait a minute! Isn’t the Premier of Manitoba, Wab Kinew, indigenous? Isn’t he a successful, law-abiding person? And wouldn’t most indigenous Canadians laugh at the idea that they had to steal to survive? How is it that Wab Kinew, and the many other successful indigenous Canadians manage their lives just fine while the shoplifters cannot?

The answer is that Wab succeeded the way all successful people do. He went to school, worked hard, and went where the jobs are. He was fortunate to have competent, caring parents who understood the importance of education and hard work. His parents also understood that assimilation (or, if you prefer, integration) was essential for their son to succeed. Wab’s father had a rough time in residential school, but used what he learned to raise a son who has become a provincial premier.

 The fact that Kinew is fully assimilated does not prevent him from celebrating his indigenous heritage. Recently, a video of him energetically performing a prairie chicken dance went viral. It showed indigenous youth that they too can be both successful Canadians – and proudly indigenous – at the same time.

It is clear from watching him dancing so vigorously that he would have been a formidable warrior in pre-contact indigenous hunting culture. Colonialism ended that possibility. But it is equally clear that he, and the other indigenous people who were willing to learn the new ways, received a lot in return from the settlers. He is now an articulate, literate, thoroughly modern man, thanks to “settler colonialism”. Colonialism has also given him an expected lifespan more than double that of yesterday’s hunter-gatherers. Colonialism gave at least as much as it took from him.

Kinew’s memoir, “The Reason You Walk” describes someone determined to live his life not as a victim, but as a confident indigenous Canadian.

He built his own life – making mistakes along the way – but learning from those mistakes, and is now the leader of a province – and lauded as a possible future prime minister. He offers no apologies to critics who suggest that an indigenous person who is successful is somehow “selling out” indigenous people. His famous reply to that old saw is “Aboriginal success is the best form of reconciliation”.

Don’t expect to find Wab Kinew stealing frozen hamburger from a Food Fare store anytime soon.

But here’s the lesson indigenous youth can learn from the example Wab Kinew, and other successful indigenous people have set: “If they can do it, so can you”. They should also tell the apologists who want to give them tired excuses – excusing theft as “reparations” for perceived past wrongs, or “intergenerational trauma” – that they, like Wab, refuse to live their lives as “victims”.

In short, the solution to the shoplifting problem is not to condone theft. It is not to treat criminals differently because they are indigenous. It is not to offer them excuses. The solution is to create more Wab Kinews.

And that’s up to Indigenous parents. No government can do that for them. For many families, like Wab’s, that will include the difficult decision to move from dead-end reserves.  But if they have the same commitment to their children’s education and upbringing that Wab’s parents had there is no reason that they can’t raise successful children in this country.

Long before he became Manitoba’s premier, Wab Kinew, regularly entertained listeners on CBC Radio. He was a refreshing, common sense voice, and always refused to play the victim. He never failed to remind young indigenous people that Canada worked just fine for him.

And, with a bit of grit and hard work, it can work for them too.

 

Brian Giesbrecht, retired judge, is a Senior Fellow at the Frontier Centre for Public Policy.

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