Innovation key to mining longevity.

AuthorMorrison, Douglas
PositionGuest Columnist

In my last article, I made the case that innovation is essential for improving mine productivity so that mines can attract new investment; the question is how this should be funded?

Funding for research and innovation across the Canadian economy is extremely low--far lower than our global competitors. In addition, most government funding for innovation comes mostly in the form of tax credits, where the benefit, if any, occurs only at the end of the tax year and only if there are profits.

Companies with a healthy revenue stream can be complacent and are the least inclined to engage in research and innovation. Tax credits make it virtually impossible for a struggling company to innovate its way back to profitability.

At present, direct government funding matches $1 from industry with $1 from government, and treats innovation and research exactly the same although the costs and risks of these activities are quite different. The spectrum of Technology Readiness Levels (TRL)--meaning readiness for the market--can help explain the differences. Basic and conceptual research projects are TRL 1-3, innovation projects are 4-7 and commercialization projects are 7-9. Bench scale tests are less expensive than pilot scale trials--so research is cheaper than innovation --but it also carries lower risk. Research projects always provide an answer, maybe not the desired answer, but an answer that leads to the next experiment. But for innovation, where failure at any stage can kill the whole program, operational trials reveal an unavoidable safety problem or something that is prohibitively expensive to fix. So innovation is more expensive and higher risk.

One new approach is graduated leverage for innovation projects where the government funding covers an increasing portion of the cost--for example $2 government to $1 industry, and up to $4:$1. This means the government's share of the innovation project increases with TRL level.

It is important to recognize that the purpose of innovation projects is to improve productivity and so attract industrial investment on a scale that is 20, 50 or 100 times the cost of the innovation project cost.

While the government's share of a graduated leverage innovation project might be 80 per cent of a $10-million, if it helps industry justify the hundreds of millions of dollars in investment for a new mine or ore-body, then it is well worth the government's investment. By escalating its share of the innovation project costs...

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