Deloitte’s Equation Nord Guide Sheds New Light on the Unique Economic Potential of Northern Quebec

MONTRÉAL, QUÉBEC – Oct. 16, 2013 – Despite extensive promotion campaigns launched by the various levels of government promising unprecedented business opportunities for entrepreneurs, and despite increased global demand for base metals, key players and stakeholders are still absent north of the 49^th parallel. This is not due to the value of the economic potential in northern Quebec, but rather to the region’s specific business environment, which comes with its share of risks and complexity.

Today, Deloitte is releasing Equation Nord: Winning Formula for Business Success in Northern Quebec, a guide to help Quebec companies that want to benefit from the development of northern Quebec. This publication targets ten issues facing companies that are looking to operate in the province’s North, in addition to identifying challenges facing investors and local businesses.

“Carrying out a project in northern Quebec can be compared to doing business in a developing country; it requires a healthy dose of courage,” says Michel K. Landry, Partner, Financial Advisory and leader of the Deloitte Equation Nord initiative.

Deloitte conducted a series of interviews with business community leaders who are familiar with the issues in northern regions, and with whom the firm shared its point of view. This guide provides insight into the various sectors involved in the development of northern Quebec, including energy, mining, finance, human resources, Aboriginal law and sustainability.

Infrastructure development: a partnership between the government and mining companies

There are currently very few access infrastructure projects underway in northern Quebec, which covers an area of 1,200,000 km², and existing networks are often outdated or under capacity. This is a very real obstacle to successful northern economic growth, at a time when governments are working to establish their policies and several projects are on hold. The vast majority of discussions between companies and the government centre on cost-sharing arrangements and sometimes lead to heated negotiations. Quebec cannot be competitive without a coordinated approach to land use planning with respect to power distribution and infrastructure.

Companies must find new sources of financing

If stock markets were once considered a good source of financing for mining companies, public offerings are not as interesting an option today as investors are no longer as forthcoming. To finance their projects, companies must now look to other sources of financing, such as foreign capital, governments and financial institutions. Foreign investors are now almost always parties to the financing of major projects, and they are involved from the outset.

Quebec companies require a clear legislative framework

Despite Quebec’s more complex tax system compared to other Canadian provinces, the value of tax credits paid to exploration mining companies in the province remains very attractive. However, to create wealth and attract foreign investment, the industry requires a clear legislative and regulatory framework, in addition to government support to help balance its budgets. Moreover, while Quebec was considered as the best place in the world for mining investment in 2008-2009, the province now ranks 11^th (February 2013).

Sustainability, in between economic development and social acceptability

Companies wishing to do business in northern Quebec must seek commitment from stakeholders from the very beginning. Without the support of communities, municipalities, citizens and members of neighbouring First Nations, a government-granted operating licence weighs very little in the balance. In fact, companies that gain local support are the ones that effectively plan out their approach, and seize the economic value gained by managing a good reputation.

Labour shortage

A healthy and transparent dialogue with stakeholders can solve the big issue faced by companies that establish operations in northern Quebec, i.e., the labour shortage. For example, the six Aboriginal groups in the region north of the 49^th parallel represent an important pool of workers that companies would be well advised to consider. Since Aboriginal communities are often located near mining properties, they are already involved in project-related negotiations. And although employers must plan for training costs, these quickly become synonymous with investments in a context where mining companies set up operations for many years.

Main recommendations of the Equation Nord guide:

• Step outside your conventional business model and do not take anything for granted-suppliers and commodities are not necessarily at hand in remote regions.

• Consider all elements of the supply chain.

• Do the groundwork; prepare your resources and project logistics through meticulous planning.

• Do not go into it alone. Surround yourself with experienced people who know your project’s environment, foster partnerships and seek out more business advice.

• Avoid the conventional operational costing model.

• Opt for a financial structure that will allow you to face long-term risks such as economic downturns or managing increased growth-as change can be quite sudden in a region as dependent on natural resources.

The entire guide is available at the following address: http://file.marketwire.com/release/ENord-eng.pdf

About Deloitte

Deloitte, one of Canada’s leading professional services firms, provides audit, tax, consulting, and financial advisory services. Deloitte LLP, an Ontario limited liability partnership, is the Canadian member firm of Deloitte Touche Tohmatsu Limited. Deloitte operates in Quebec as Deloitte s.e.n.c.r.l., a Quebec limited liability partnership.

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity.

Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.

CONTACT INFORMATION

Dominique Dorais
Hill+Knowlton Strategies Canada
514-375-2727
dominique.dorais@hkstrategies.ca