Rich resource base propels profits: the accountants have spoken and confirmed what we've known for quite some time. Saskatchewan is far and away the most profitable mining jurisdiction in Canada. (Economics).

According to calculations done by the federal government, profits in the Saskatchewan mining sector far outpace those in any other province. So much so that federal transfer payments were reduced by $300 million last year, an amount since negotiated to half that. Yet the question remains: What makes mining in Saskatchewan so profitable?

Saskatchewan is in an enviable position on all accounts (no pun intended) answers Claude Resources President Neil McMillan. We're blessed with resources that are world-class on two, three and possibly four fronts - uranium, potash, coal and the potentially huge diamond play in central Saskatchewan.

"The uranium reserves in this province are so rich that the low cost of exploiting the resource makes it impossible for other jurisdictions to compete," McMillan says. The grade of certain uranium deposits now being mined exceeds 60 per cent, with entire ore deposits averaging more than 17 per cent.

"The grades are, in a word, spectacular," he says. "At this point there is no evidence that a grade so consistently high can be found anywhere else in the world."

The potash industry has long since accounted for exploration costs and years of expensive development time that normally average out over the life of a mine. In almost every other undertaking the ore eventually runs out, exploration is done and new mines are built.

Not so in Saskatchewan potash, where they've literally been running into the stuff at every turn since current operations began in the late 1960s and early 1 970s. Yet potash holds its value on world markets because it's not as easy to retrieve elsewhere.

"The potash resources are incredibly significant. By some estimates there is a 700-year known supply of potash," McMillan says. "At the same time, the infrastructure is in place and those initial costs have already been factored in."

Those two industries alone supply Saskatchewan with a significant natural madvantage on the Canadian and international mining scenes. Add on precious metal mining, a robust coal industry and other mining ventures and it creates an extremely powerful economic engine.

"These industries are tremendous employers of people," McMillan states. "Our ability to exploit these resources results in substantial and high-quality employment."

The political will to cash in on mining, however, has not always taken advantage of the province's natural abundance. Saskatchewan has long faced this challenge, McMillan notes, and only recently has the provincial government taken aggressive steps to promote mining.

When it comes to gross provincial profit, an industry such as agriculture rolls each dollar through the economy an estimated six times. Mining's multiplier isn't nearly as impressive due to a scarcity of value-added processing and little research activity.

"Yet there are still a lot of opportunities on the technical side;' McMillan stresses. "Saskatchewan could become a centre of excellence in environmental technology research. We have a well-educated population and all the natural resources at our doorstep. My question for a long time has been 'who better than us to provide research into environmentally friendly practices?'"

He believes the province is perfectly positioned to step up its energy production through solar power, wind power, ethanol, coal and uranium. Already 70 per cent of Saskatchewan's electricity is produced by coal-fired generators. Raw material from this province accounts for an astounding six per cent of total global energy production.

Saskatchewan coal -- which burns cleaner than most coal sources -- and natural gas have issues on the hydrocarbon front. Yet nuclear power plants using Saskatchewan uranium produce no greenhouse gases and are far more cost-effective than most energy sources.

"Even the whole hydrogen economy, which many people believe is the future of energy, doesn't work unless you use nuclear power to produce the hydrogen;' McMillan insists. "We have an environmental responsibility and, I would argue, a moral obligation to not rule out the use of nuclear technology."

Another area where Saskatchewan has been reluctant to take full advantage of its natural resources is in base metals. The formation hosting base metals in the Flin Flon area has produced billions of dollars in economic activity for Manitoba yet only very modest work has been done on the Saskatchewan side of the formation.

The province's gold resource has also been under-explored. It was long viewed that Saskatchewan's gold deposits would never amount to much, yet the Seabee mine is in its 12th year of continuous mining and to date has produced more than 600,000 ounces of gold.

"Seabee is disproving those former assumptions;' McMillan says. "We're profitable at these gold prices because we have had to learn to operate efficiently in what has been the most vicious down cycle the industry has seen in a long time. Even now, base metal and precious metal exploration is grossly underfunded worldwide and gold production is expected to drop this year."

Saskatchewan also holds significant promise in other assets, most notably diamonds. It would be amazing to find yet another vast and valuable commodity beneath the soil of a jurisdiction the size of Saskatchewan, yet the proven existence of the world's largest swarm of diamondbearing kimberlites at Fort a la Come could lead to history's largest diamond mine in terms of value of ore moved.

McMillan applauds the provincial government's approach to the diamond play and on its overall will to promote and encourage the mining industry recently.

"We have in the past been reluctant to take advantage of what really is an embarrassment of riches. We are now recognizing that investments in mining pay off for Saskatchewan," he concludes.