The billion-dollar question is how recent merger activity in Canada's mining sector will affect Canada's economy, says Michael Amm in Embassy

November 22, 2006

Many Canadian mining firms joined forces or were bought by foreign companies in 2006. The impact on Canada's economy and reputation remains to be seen.

Commodity prices skyrocketed while Canada's mining sector's largest companies merged or bought each other out. Acquisitions included Barrick Gold's purchase of Placer Dome in March and subsequent sale in May of large portions of Placer Dome's operations to Goldcorp; Nickel giant Inco’s nearly C$20 billion acquisition by Brazilian iron ore giant Companhia Vale do Rio Doce; and Falconbridge’s C$24.8 billion sale to Xstrata.

Michael Amm says now everyone will have to wait to see how the moves will affect Canada's mining industry and overall economy: "That's the billion-dollar question. The mining industry is very important for our economy."

Analysts predict that if the companies decide to maintain their head offices in Canada, the effect will likely be negligible. But if not, the Canadian industry could lose some of its influence, global reputation and competitiveness. Canada could also lose out on research and development projects, as well as tax revenue as profits from operations overseas flow to other countries rather than through Canada.

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