Overview of Trends in Canadian Mineral Exploration 2008

Executive Summary

This report covers the years 2007 and 2008, a period that will be remembered as the onset of a major worldwide economic downturn that has its roots in the U.S. sub-prime mortgage crisis. Reduced demand for minerals and metals, edgy capital markets, and insecurity related to the ultimate extent and duration of this economic collapse have brought to a sudden halt the period of prosperity that the minerals and metals industry was enjoying as a result of highly favourable commodity markets.

In terms of mineral exploration and deposit appraisal activity, statistics from the federalprovincial/ territorial Survey of Mineral Exploration, Deposit Appraisal and Mine Complex Development Expenditures show that 2007 was another year of exceptional growth despite the gathering economic storm. In fact, the total expenditures of $2.8 billion recorded in 2007 represented a new all-time high in the history of mineral exploration in Canada.

With revised spending intentions of $3.1 billion for 2008 (collected between March and June 2008, and current as of December 2008), the Canadian mineral exploration sector appeared poised for another all-time record as well-funded companies continued to invest heavily in their projects, even as the market outlook worsened. However, due to a rapidly deteriorating economic outlook, indications are that this forecast was likely overstated and that, in the end, 2008 spending may in fact approach the level of 2007. A final compilation of actual 2008 spending will be released later in 2009.

This latest growth period was characterized by a strong focus on off-mine-site and exploration-phase spending, both inside and outside of traditional mining camps. It was also highlighted by the emergence of the junior mining sector as the dominant force in the Canadian mineral exploration and deposit appraisal sector. The favourable market outlook that led to exploration and deposit appraisal spending records was so broad-based that the overall effort was distributed among many mineral commodity targets and regions.

In fact, this intense period of activity led to the announcement of numerous mineral occurrences and discoveries, upgrades of resources and reserves, and the advancement of many projects. Responsible authorities in the provinces and territories can provide information on these developments, and links to their web sites are provided in Chapter 2 of this report.

In the midst of this economic turmoil, Canada continues to be the top destination in the world for exploration capital. In 2008, some 21% of the mineral exploration programs planned by the world’s large and small companies was expected to be conducted in this country. As for Canadian companies, they were expected to account for almost 43% of all exploration programs undertaken in the world in 2008, a share that is by far the largest of the global mineral exploration effort.

With the global economy reeling from successive economic and financial shocks, and with no recovery yet in sight, 2009 will be a difficult year for most economic sectors. For mineral exploration and mining companies, this uncertain economic environment translates into lower commodity prices, risk-averse equity markets, reduced and more expensive debt financing, and cost-cutting pressures on existing projects and operations. Although work will continue, possibly at a reduced pace, on many of the properties that are so important for the pipeline of future Canadian mineral development projects, 2009 should mark at least a break in the upward trend in exploration and deposit appraisal spending that has prevailed for the past eight years.