The Economies of Canada’s three northern territories will continue to be buoyed in 2011 by their strong suit — resources. But as economists generally note, change in the economies of the Yukon, the Northwest Territories and Nunavut varies widely from year to year and among sectors. Thus, it’s important to keep a broad, long-term perspective when evaluating the economic prospects for Canada’s Far North.

Says Kris Shaw, economist with the Conference Board of Canada in Ottawa: “It will be a strong year for [real gross domestic product] growth in all the territories. But the drivers differ for each region.”

This year, rising global demand for metals and diamonds augurs well for all three territories. And the potential for long-term economic expansion in the future could be dramatic. For example, the real GDP of the largest of the economies, the N.W.T., grew by 135% to $5.4 billion from $2.3 billion in the 10 years ended Dec. 31, 2008. Still, while that long-term rate is faster than the growth of any other Canadian provincial economy over the same period, those years include widely divergent results, such as growth of 13% in one year and a contraction of 1% in another.

Apart from natural resources, the three territories are heavily supported by government spending. If public funds are not the No. 1
contributor to real GDP in each of these jurisdictions every year, says Shaw, it is No. 2. In fact, if public administration and non-commercial services are combined, public-sector spending accounts for a larger share of real GDP than any other sector — about 30%. Public spending aside from residential structures was up by more than 40% in 2009, Shaw adds, and remained strong last year, helping to support investment.

Increased global demand for diamonds is the chief driver for the N.W.T.’s economy, and diamond mining is what makes the N.W.T. the largest economy in the North. While the Yukon’s economy is more diversified, it is led by exploration and mining for precious and earth metals. And Nunavut’s economy is centred on the Meadowbank gold mine.

A closer look at the territories:

> Northwest Territories

Dan Westman, manager of economic planning for the N.W.T. in Yellowknife, says mining will remain a bright spot in 2011.

The Snap Lake diamond mine, the smallest of the three major diamond mines in the N.W.T., is owned by Toronto-based DeBeers Canada Inc. a wholly owned subsidiary of Luxembourg-based DeBeers Group. Snap Lake is ramping up production through to the end of 2012, having cut jobs and production following the recession that began in 2008.

Diavik, the largest of the diamond mines and a joint venture between Harry Winston Diamond Corp. of Toronto and London-based Rio Tinto PLC, aims to produce eight million carats in 2011, according to Shaw.

In addition, Australia-based BHP Billiton Ltd.’s Ekati diamond mine, which produces about 4% of the world’s supply, is entering what Shaw calls the “second phase of its life,” as it converts from open pit to underground production.

Westman says the challenge now is to find replacements for aging mines. He points to the NICO mine near Great Slave Lake as a driver of growth in 2011. If that cobalt/gold/bismuth project, owned by London, Ont.-based Fortune Minerals Ltd., goes ahead, it could add about 300 employees in the next five years. As well, environmental regulators are assessing De Beers’ proposed Gahcho Kue diamond mine.

> The Yukon

This territory saw record-high levels of mining exploration in 2010 and, according to Shaw, 2011 will see “similar heated activity. There’s a stable, steady positive outlook for Yukon, much of it having to do with new mines opening up and continued interest in exploration.”

Based on that assumption, he adds, the Yukon should see 3%-4% real GDP growth through 2015.

Three new mines will be in production in 2011, says Harvey Brooks, the Yukon’s deputy minister of economic development in Whitehorse.

Most important, the only new base-metals production in North America, the Wolverine zinc/silver deposit, is ramping up. Vancouver-based Yukon Zinc Corp. expects to employ up to 250 people when the project reaches full capacity at the end of this year. And Alexco Resource Corp.’s Bellekeno silver mine is already in full production.

Small to medium-sized construction outside the mining industry will also contribute to the Yukon’s GDP. Three levels of government are involved in building a new jail, health-care facilities and police headquarters in Whitehorse.

> Nunavut

The next few years are likely to see a lot of economic development in Nunavut, according to Shaw, but currently, it’s still a “one-story territory”: the Meadowbank gold project, northwest of Hudson Bay, will hit peak capacity at some point in 2011.

According to Eric Howe, professor of economics at the University of Saskatchewan in Saskatoon, Meadowbank is the single biggest contributor to Nunavut’s real GDP since the territorial government was formed almost 11 years ago. When the mine opened last year, it almost certainly drove Nunavut’s 2010 GDP growth up into the double digits.

GDP growth in the youngest territory won’t reach those heights in 2011, but it’s still clear that there’s a lot to watch out for in Nunavut. IE