Canada’s Territories, unlike their provincial neighbours to the south, should see their economies return to above-average growth in 2010, say economists and local economic leaders.

“Growth in 2009 would have gone up just a smidgen, but gross domestic product should start to grow more robustly in 2010,” says Eric Howe, a professor of economics at the University of Saskatchewan in Saskatoon who conducts research into the territories’ economies.

GDP growth varies greatly from year-to-year in the three territorial economies that make up Canada’s north: the Northwest Territories, Nunavut and the Yukon, many analysts note. Mining production, by far the dominant industrial activity, can vary and skew the numbers, so analysts say it’s best to make measurements on a long-term basis.

For example, the largest of the economies, that of the N.W.T., grew by 135% to $5.4 billion from $2.3 billion in the 10 years ended Dec. 31, 2008. Although that long-term rate is faster than the growth of any Canadian provincial economy, those years include varied results, such as growth of 13% in one year and a contraction of 1% in another.

Furthermore, the N.W.T. government’s 2009 economic review — published by the Ministry of Industry, Tourism and Investment — states that the N.W.T.’s economy could grow by a further $750 million by the end of 2012.

The report also reveals that the territory’s per capita GDP is $125,000, which is more than twice the national average of $48,100; however, that figure is skewed by the N.W.T.’s small population.

The major banks don’t make GDP forecasts for the territories as they do for the provinces. Forecasting early in the year for the territories’ economies is difficult because mining companies don’t tend to firm up production plans until well into the spring, and their activity can greatly affect overall GDP output — sometimes even doubling it with one project, says Harvey Brooks, the Yukon’s deputy minister of economic development, in Whitehorse.

Diamond mining in the N.W.T. is the biggest economic driver in Northern Canada; and the sector looks ready to recover in 2010, says Alex Koustas, an economist with Bank of Nova Scotia’s economics department in Toronto: “Demand for diamonds was understandably low during the recession, but should pick up in the coming year.”

Setting aside diamonds, mining for gold, other precious metals and natural resources in general are crucial to all the territories’ economies. It’s safe to say that the resurgence in commodities prices will have a positive effect.

Howe notes that the structure of the northern territories’ economies is evolving, from being dominated by local trade and government services to mining. He says his studies show that in the 10 years ended Dec. 31, 2009, service and government-related jobs have dropped to 40% of the total workforce from 50%.

“People who work up there are paid very well … but it’s also a very expensive place to live,” Howe says. “Wages are high, but so are all costs of production.”

Here’s a closer look at the three territories:

> Northwest Territories. Dia-mond mining is back to pre-recessionary levels, says David Westman, manager of economic planning for the N.W.T. government in Yellowknife: “The diamond mines are back to where they were. We’ve totally recovered.”

Canada is home to four diamond mines, and three of them dominate the N.W.T.’s economy. (Toronto-based DeBeers Canada Inc. operates the fourth, in Ontario.)

DeBeers Canada owns the Snap Lake mine, about 220 kilometres northeast of Yellowknife. The company cut about 125 jobs at the mine in 2008, but announced this past autumn that the mine will reach full production by the end of 2012. This includes an additional 175 jobs by the end of 2010. The mine currently employs 440 people, 44% of whom are N.W.T. residents. The mine opened in July 2008 and will employ 634 people in total by 2012.

The owners of the Diavik diamond mine also said this past autumn that they will hire another 125 people to mine underground at the operation, about 300 km north of Yellowknife. Diavik is a joint venture between Harry Winston Diamond Corp. of Toronto and London-based Rio Tinto PLC.

Finally, Australia-based BHP Billiton Ltd.’s Ekati diamond mine, which produces about 4% of the world’s supply of the precious stone, is applying to local governments for permits to mine more land, which would extend the life of the project.

@page_break@And as long as the economics are good for rare-earth metals and stones, more projects could come online in the next few years, Westman adds. He notes that the Yellowknife Gold Project, owned by Vancouver-based Tyhee Development Corp., may come into production, while London, Ont.-based Fortune Mineral Ltd. — which owns a mine with proven deposits of gold, bismuth and other minerals — announced last year that it would increase production.

> The Yukon. Brooks describes “a modern-day staking rush” in the White Gold Area Play, about 40 km south of Dawson City.

A handful of companies — including Underworld Resources Ltd., ATAC Resources Ltd. and Kaminak Gold Corp., all of Vancouver — have laid claim to the property, and 2010 should attract more activity, which will have a big effect on the jurisdiction’s small population of 33,000.

“There’s a tremendous amount of optimism following up on last year’s discovery,” Brooks says. “We expect mineral exploration to be higher than in 2009.”

In addition, the only new base-metals production in North America goes into production this year at the Wolverine zinc/silver deposit, which is owned by Vancouver-based Yukon Zinc Corp.

“It’s extremely important for local jobs,” says Brooks. “Plus, there’s ongoing development costs and exploration in that area.”

After natural resources, construction is expected to be a major contributor to the economy in 2010, says Brooks. Commercial, residential and institutional construction activity, which generally supports the mining communities, will pick up.

Brooks adds that “significant infrastructure stimulus funds” will be put to work in 2010 on residential homes, roads and hydro projects.

> Nunavut. About 70 km north of Baker Lake, which is northwest of Hudson Bay, lies the Meadowbank gold project, which is going into production right now.

Howe says it will be the single biggest contributor to Nunavut’s GDP since the territorial government was formed almost 11 years ago. Toronto-based Agnico-Eagle Mines Ltd., which owns the property, says it will produce between 1 million and 1.1 million ounces of gold.

Says Howe: “That will move GDP [upward] significantly.” IE