Overview of Trends in Canadian Mineral Exploration 2009

1. Mineral Exploration and Resource Development in Canada - 2009 Review

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Louis Arseneau1

The author is the Chief, Exploration, with the
Minerals and Metals Sector, Natural Resources Canada.
Telephone: 613-995-0959
E-mail: louis.arseneau@nrcan-rncan.gc.ca

INTRODUCTION

The eight-year upward trend in exploration and deposit appraisal expenditures that carried the Canadian mineral exploration sector to record levels of activity came to a sudden halt in 2009 (Figure 1.1). However, the slowdown really began in the second half of 2008 when the global financial and economic crisis began to take a toll on metal markets as illustrated by Natural Resources Canada’s (NRCan) Monthly Metals Price Index (Figure 1.2). Despite a $1.5 billion decline from the 2008 total of $3.3 billion, the revised company spending intentions total of $1.8 billion for 2009 remains strong by historical standards. For instance, in the late 1990s/early 2000s, prior to the just-mentioned upward trend, exploration and deposit appraisal spending in Canada hovered around the $500 million mark (current dollars), reaching a constant 2008 dollar low of $615 million in 2000.

The worldwide crisis had a major and immediate impact on the Canadian and global exploration and mining industry. Companies that were under sudden financial duress had to move beyond simply delaying plans and projects and adopt more drastic measures to survive and preserve their cash and property assets. At the time of writing this report (January 2010), there were signs that the global economy was beginning to turn around and it was becoming clearer that some shifts were occurring in the industry. In particular, changes in the ownership of promising exploration and development properties, and the arrival of new capital providers, were starting to breathe new life into some projects and accelerate their development.

This article presents a summary of some of the events and trends that both affected and shaped the Canadian mineral exploration sector in 2009. It also introduces, summarizes, and complements other articles found in the 2009 Overview of Trends in Canadian Mineral Exploration report.

ECONOMIC CONTEXT

Apart from geological potential and other elements of a country’s mineral investment climate, such as taxation and political stability, mineral exploration activity in a given year can be linked to the quality and prospectivity of existing projects and new discoveries, and to past and future price outlooks for minerals and metals. Prices are an important factor in a senior mining company’s exploration budgeting exercise as they influence revenues and profits and thus determine the amount of internally generated funds that will be available for exploration and deposit appraisal work. In the case of junior companies, which have no internal sources of revenue, the same factors apply, but these firms have more flexibility in deciding which commodities to pursue. The key for this group of companies remains a combination of prices, positive outlook, and positive project-related news that will convince potential partners and equity investors to finance their activities.

figure 1.1

figure 1.2

Impact of the Economic Crisis

As discussed in more detail in Chapter 2, mineral exploration and deposit appraisal spending in Canada had been trending upward since the early 2000s. Buoyed by strong prices, it reached a record $3.3 billion in 2008. However, in the latter half of 2008 and in 2009, companies were suddenly faced with a tightening of credit, both debt and equity, and collapsing prices. Companies swiftly revised their plans and adopted survival measures to service debt, preserve cash reserves, and protect main assets (properties) in hope of a quick recovery. As a result, exploration and capital expenditure budgets were slashed in the second half of 2008 and in 2009.

On the mine development and production side, cuts were multi-faceted. They included production cutbacks, mine closures, and a host of other corporate decisions resulting in delays, suspensions, and cancellations of planned investments and developments. These measures were, for the most part, announced in the last quarter of 2008 and first quarter of 2009. High-profile examples of such announcements include reduced output at De Beers Canada’s Snap Lake and Victor diamond mines (November 2008),2 the closure of Xstrata Nickel’s Craig and Thayer-Lindsley nickel-copper-platinum group metals mines (January 2009), and Iron Ore Company of Canada’s decision not to proceed with its Sept-Îles pelletization plant restart project (February 2009).

In terms of total exploration and deposit appraisal spending intentions, corporate adjustments to the new economic reality translated into a year-on-year expenditure decline of 44% as revised spending intentions for 2009 fell to $1.8 billion. In retrospect, this level of investment remains well above the historical average (Figure 1.1). However, the magnitude and suddenness of this drop raised the prospect, especially in early 2009, of it being the initial phase of a multi-year declining trend. Also at issue was the fact that many of the projects that had progressed along the mineral development curve in the recent growth period were at risk due to corporate financial difficulties. Examples of such projects encountering difficulties included Baffinland Iron Mines Corporation’s Mary’s River iron ore project3 in Nunavut, Canadian Royalties Inc.’s Nunavik nickel project4 in Quebec, and Shore Gold Inc.’s Star diamond project5 in Saskatchewan.

Year-End Economic Conditions

Although 2009 was a tumultuous year, the prices of most minerals and metals ended up rallying and overcoming generally high inventory levels. In 2009, the prices of copper and zinc had increased by 139% and 111%, respectively (in U.S. dollar terms). The price of gold, which surpassed US$1200/oz in December, rose by 26% during the year to provide a much-needed lifeline to the mineral exploration sector in Canada and to hard-hit junior mining companies in particular.

Besides continuing uncertainty, the rally in metal prices has been offset, albeit only partially, by a strengthening of the Canadian dollar vis-à-vis the U.S. dollar. In 2009, the Canadian dollar appreciated by 16% relative to the U.S. dollar. While this appreciation in the exchange rate may have affected mining companies with operations in Canada, it probably had less of an impact on investment directed to the earlier stages of mineral development (exploration and deposit appraisal). However, project operators will have to consider the potential impact of the anticipated longer-term weakness of the U.S. dollar in economic and feasibility studies conducted on their projects.

Based on information available at the end of 2009, the prices of most minerals and metals were expected to continue to rise in 2010, but at a slower pace and scale than in 2009. Major factors that will influence short-term price levels include demand by China and sovereign wealth funds, supply constraints (labour strikes, underinvestment, ore depletion), re-stocking of metals by developed economies, the performance of the U.S. dollar, investors’ interest in hard assets as opposed to the U.S. dollar or government bonds, the continuation or scaling back of the massive fiscal and monetary stimulus that was implemented in many countries, and the potential for further global economic disruptions.

ACTIVITY LEVELS

Mineral Exploration and Deposit Appraisal

As mentioned earlier in this chapter, and as described in more detail in Chapter 2, the year 2009 marked the end of a strong period of growth in Canadian mineral exploration. Following the difficult years of the late 1990s and early 2000s, the period from 2004 to 2008 was one of substantial investment and project advancement. The latter years displayed particularly strong year-to-year growth in spending, although an allowance has to be made for inflationary pressures on the supply of goods and services to this industry (e.g., as shown in Figure 2.5b in Chapter 2, drilling costs increased significantly starting in 2003). Along with rising expenditures, the following sub-trends were noted in the latest growth period:

  • The intensification of the exploration effort was multi-jurisdictional; most provinces and territories recorded strong growth in exploration and deposit appraisal spending.
  • The focus of the exploration effort was multi-pronged; strong prices for a number of minerals and metals resulted in a broader range of targeted commodities.
  • Exploration (grassroots exploration) was more predominant than deposit appraisal (advanced exploration) although, in the latter years, many projects progressed towards the later stages of the exploration phase and into the deposit appraisal phase.
  • Junior mining companies gathered a lot of strength and momentum early on and overtook senior companies as the most important group of companies conducting exploration in Canada.

While it is too early to assert that the 2009 decline was temporary, there are significant economic risks remaining for a weakened industry and a nervous and risk-averse investor base. The strength of the gold price, continued interest in commodities such as uranium and potash, and the emergence of rare earth elements as a popular target should support the industry, but a positive outlook for base metals will be instrumental to a return to long-term expenditure growth.

Mineral Resource Development

The eight-year upward trend in exploration and deposit appraisal spending resulted in a number of projects moving ahead on the mineral resource development curve. Progress within the exploration phase and graduation from the exploration phase to the deposit appraisal phase were relatively common as spending, and associated work programs, intensified during this prosperous period. Overall, total mineral resource development (exploration, deposit appraisal, and mine complex development, including associated capital, and repair and maintenance expenditures) peaked at $12.7 billion in 2008.

Out of this cohort of advancing projects, the ones most likely to contribute to Canada’s future minerals and metals production are those undergoing deposit appraisal and capital-intensive mine complex development work. In 2008, 19 projects entered the mine complex development work phase and 50 new or re-emerging projects became part of a deposit appraisal program. Despite delays and uncertainties created by the economic crisis, recent adjustments in schedules, scope, and/or ownership should reaffirm or even accelerate development intentions.

Observations From the Preliminary 2009/Spending Intentions 2010 Survey

Responses to the Preliminary 2009/Spending Intentions 2010 survey were being compiled at the time of writing this report (January 2010) with a view to publishing a 2010 company spending intentions forecast in February 2010. Preliminary inferences from the compiled data include:

  • a rebound in the number of survey respondents (including a number of newly formed companies);
  • a lingering hesitancy to report definite exploration plans for the coming year because of ongoing economic uncertainty;
  • a continuation of the strong contribution of junior companies to the country’s exploration effort (access to funds permitting);
  • a commodity focus that is centred on gold and precious metals, reflecting continued uncertainty surrounding the outlook for base metals; and
  • a company spending intentions forecast that would mirror or slightly exceed the preliminary total recorded in 2009 (in the range of $1.8 billion-$2.2 billion).

Canada’s Contribution to Global Exploration

As explained in Chapter 5 of this report, global mineral exploration statistics are collected by the Metals Economics Group (MEG) and published in an annual analytical report titled Corporate Exploration Strategies: A Worldwide Analysis. Using information from this report, the global exploration presence of Canadian-based companies can be analyzed and Canada, as a source of exploration or as an exploration target, can be compared to other countries of the world. The following points summarize Canada’s contribution to global mineral exploration as per the data contained in the MEG report.

  • The economic crisis took its toll on worldwide exploration budgets as the value of exploration programs expected to be undertaken in 2009 was down by US$5.3 billion (42%) from the US$12.6 billion recorded in 2008.
  • On a country basis, the largest decrease was recorded in Canada (US$1.2 billion) followed by Australia (US$795 million), the United States (US$434 million), and Mexico (US$406 million).
  • Despite a significant decrease in market share and exploration budgets, Canadian companies were once again planning to spend more than those from any other country surveyed, with Canada accounting for 34% of all exploration programs undertaken in the world in 2009.
  • Canada continues to be the world’s top destination for mineral exploration capital, accounting for a 16% share of global budgets in 2009.

FINANCING

Canada continues to be a major centre for generating the equity needed to discover, investigate, and develop mineral resources, both in Canada and abroad. Canada’s TMX Group (which includes the Toronto Stock Exchange [TSX] and the TSX Venture Exchange [TSX-V]), along with a well-developed specialized services cluster (banks, brokerage firms, legal firms, mining analysts, etc.), provide exploration and mining companies with the resources they need to access a mining-friendly pool of risk capital.

In fact, according to statistics from the TMX Group,6 57% of the world’s public mining companies were listed on the TSX and TSX-V at the end of June 2009. The TSX-V provides junior mining companies with access to risk capital and, pending successful results, a streamlined path towards potential graduation to the TSX. As of June 30, 2009, a total of 334 mining companies were listed on the TSX and 1084 were listed on the TSX-V. In a year that saw the erosion of company valuations, these 1418 companies had a combined market capital value of over $278 billion.

According to data compiled by Gamah International Limited,7 mining equity raised in Canada totaled $19.5 billion in the first 11 months of 2009 (Table 1.1), a significant 79% increase from the same period in 2008 ($10.9 billion). These funds were destined for projects in Canada and elsewhere around the world.

A further examination of 2009 data from Gamah International reveals that:

  • Large companies (with an annual revenue greater than US$5 billion) were mostly planning to use the equity raised to retire or refinance debt.
  • Companies in the US$50 million-US$5 billion revenue range were mostly planning to use the funds for working capital and project development/construction.
  • Exploration companies with no production (junior companies) were planning to use the equity for project development/construction, exploration, working capital, and acquisitions.
  • The funds raised for Canadian-based projects targeted mainly gold, diamonds, uranium, and nickel.

Of the 1071 transactions (private placements, non-brokered private placements, prospectus offerings, etc.) recorded for the first 11 months of 2009, successful Canadian issuers (besides large companies like Barrick Gold Corporation, Teck Corporation, and Cameco Corporation) included future producing companies like Osisko Mining Corporation (Canadian Malartic), Lake Shore Gold Corp. (Timmins mine, Thunder Creek, Bell Creek), and Detour Gold Corporation (Detour Lake).

Of the overall total of $19.5 billion, $335 million was raised during the first 11 months of 2009 (Table 1.1) with the help of Canada’s flow-through-share mechanism (which allows companies to flow through to their investors the 100% Canadian Exploration Expenses [CEE] corporate income tax deduction they receive for eligible work expenses). Therefore, at least $335 million was raised on Canadian exchanges for pure exploration work (CEE qualified) in Canada. This amount represents a 41% decrease from the $568 million raised during the same period in 2008 (after a full-year total of $1 billion in 2007. In an effort to support the junior mining sector, the federal government, in its 2009 Budget, extended the 15% Mineral Exploration Tax Credit (METC) for another year (until March 31, 2010). Junior company shares are usually considered a speculative investment and the lower levels of flow-through-share financing for 2008 and 2009 are a clear reflection of the unease that took hold of the stock markets as the economy weakened.

Flow-through shares and the METC have been supporting the financing activities of junior mining companies and have been instrumental, along with rising metal prices, in helping these companies achieve record levels of spending. Since the October 2000 introduction of the METC, over $4.2 billion in flow-through funds has been raised for exploration in Canada. While the use of these mechanisms has declined in the past two years, the junior mining sector remains concerned about the future of the METC beyond March 2010 and about access to risk capital.

TRENDS AND DEVELOPMENTS

Project Ownership

The economic turbulence of 2008 and 2009 created fertile ground for cash-rich companies, sovereign wealth funds, and state-owned enterprises to secure ownership stakes in a number of Canadian projects. In order to survive, companies in weakened financial positions were forced to sell properties and/or find new financial partners.

In Canada, the participants in this realignment exercise included junior companies with promising projects, but currently without the necessary resources to advance them further (i.e., Canadian Royalties Inc.’s Nunavik project), well-financed senior companies looking for new sources of resources and reserves or product diversification/complementarity (i.e., Kinross Gold Corporation’s strategic investments in Harry Winston Diamond Corporation, BCGold Corp., and Underworld Resources Inc.), and private and state-owned foreign companies seeking promising properties to meet their financial and/or strategic (security of supply) imperatives. In the latter category, some notable transactions recorded in 2009 with potential to spur activity in different regions of the country include:

  • the creation of a joint-venture company between China-based Yunnan Chihong Zinc & Germanium Co. Ltd. (50%) and Selwyn Resources Ltd. (50%) to advance the Selwyn zinc-lead project on the Yukon-Northwest Territories border towards a bankable feasibility study and production;
  • the formation of a joint venture, by early 2010, with respect to Taseko Mines Limited’s Gibraltar copper-molybdenum mine in British Columbia, in which Taseko Mines will hold 75% and Japan-based Sojitz Corporation will hold 25%;
  • the acquisition of Freewest Resources Canada Inc.’s interests in three “Ring of Fire” chromite properties in the James Bay Lowlands of northern Ontario by U.S.-based Cliffs Natural Resources Inc.;
  • the acquisition of Canadian Royalties Inc. and its Nunavik nickel-copper-PGM project in northern Quebec by Jien Canada Mining Ltd. (China-based Jilin Jien Nickel Industry Co., Ltd. [75%] and Goldbrook Ventures [25%]);
  • the acquisition of Yukon Zinc and its Wolverine zinc-silver project in the Yukon by China-based Jinduicheng Molybdenum Group Ltd. and Northwest Nonferrous International Investment Company Ltd.;
  • a strategic investment of US$240 million by China-based Wuhan Iron and Steel (Group) Corporation for a 25% share in a limited partnership to develop Consolidated Thompson Iron Mines Ltd.’s Bloom Lake iron ore project (Quebec);
  • the confirmation of the eligibility, in principle, of Baffinland’s Mary River iron ore project in Nunavut for untied loan guarantees in the amount of US$1.2 billion from the Federal Republic of Germany;
  • the acquisition by Brazil-based Vale (Companhia Vale do Rio Doce) of the Regina exploration-stage potash property in Saskatchewan from Rio Tinto plc.; and
  • a private placement of $1.74 billion in the Class B voting shares of Teck Resources Limited by China Investment Corp., translating into 17.2% of the equity and 6.7% of the voting interest of the large, diversified Canadian natural resources company.

Although some of these transactions resulted in a loss of control or ownership for companies that had concentrated their resources on bringing projects forward, the infusion of fresh capital, skills, technology, and management that the new investors will bring in this wave of transactions should provide the impetus needed to develop new mines in Canada.

Commodities of Interest

The overall strength in the prices of minerals and metals during the years that preceded the economic downturn (Figure 1.2) resulted in exploration and deposit appraisal expenditures being distributed across many different commodities and regions of Canada (Figure 2.6 and Table 2.8 in Chapter 2). In addition to precious metals, base metals, and diamonds, significant sums were invested in the search for other commodities such as uranium, coal, and molybdenum. While the overall commodity basket remained more or less the same in 2009, some products stood out in terms of investment received or attention gathered. This is the case for gold, potash, uranium, and rare earth elements (REE).

With the price of gold averaging US$972.35/oz in 20098 and reaching a high of US$1212.50/oz on December 2nd, it is not surprising that this metal became a lifeline for companies attempting to survive the economic downturn. With an abundance of gold properties to offer, including some in new prospective areas and in former producing districts, companies presented investors with opportunities to take advantage of gold’s attractiveness as a safe haven and hedge against the weakness of the U.S. dollar. The latter responded favourably by providing the capital necessary for projects to proceed, and over $1.7 billion was spent on searching for gold in 2008 and 2009 (Figure 2.6 and Tables 2.7 and 2.8 in Chapter 2).

Although the short-term outlook for the price of potash does not appear to be strong, its longer-term prospects are behind the strong activity levels recorded in 2008 and 2009 in Saskatchewan. Both BHP Billiton (Jansen project) and Vale (Regina project) have made the decision to enter the fertilizer sector, as have a number of junior companies (such as Potash One Inc. [Legacy project] and Western Potash Corp. [Milestone project]).

Uranium, which began to draw serious interest in 2006, continues to be a major exploration target despite public opposition to exploration for this metal in some parts of the country (see the Land Access and Security of Tenure section below). Driven by a relentless demand for energy and fueled by a massive expansion of emissions-free nuclear power generation capacity, especially in Asia, uranium exploration and deposit appraisal expenditures in Canada have amounted to over $1.2 billion since 2006. Uranium expenditures now outrank those for copper, nickel, and diamonds (see Figure 2.6 and Table 2.7). While Saskatchewan, which announced a strategic direction to enhance uranium development in December 2009,9 remains the country’s unquestionable leader in terms of uranium production and exploration, Quebec, Nunavut, and Newfoundland and Labrador (where a temporary uranium moratorium is in effect on Inuit-owned lands) also attract their share of interest in this energy commodity (see Tables 2.8 and 2.9).

Exploration interest in REE has increased significantly in the last two years because of their importance in the green economy (electric and hybrid vehicles, wind turbines, low-energy light bulbs, etc.), in high-technology products, and in military applications. A proposal by China’s Ministry of Industry and Information Technology to ban Chinese exports of some REE and to limit exports of others by 2015 has fueled a rush to secure sources of REE outside of that country. According to the U.S. Geological Survey Mineral Commodity Summary on REE, China accounts for 97% of world production of these elements.10 In the automotive sector, the need to secure lithium supplies has even led companies like Toyota Motor Corporation, Mitsubishi Corporation, and Magna International Inc.11 to bypass established market sources and invest directly into lithium exploration and development projects. Although exploration and deposit appraisal spending for these products remains relatively modest (see Chapter 2), this commodity group should experience significant growth in activity in 2010 as projects continue to be developed in a number of Canadian jurisdictions.

OUTSTANDING AND EMERGING ISSUES

As part of the global industry that finds, extracts, and processes depletable mineral resources, the Canadian mineral exploration and mining sector faces a number of challenges at the international, national, and local levels. While corporate social responsibility12 and Bill C-30013 have a more international focus, the issues discussed in this section are more about the industry’s ability to sustain its contribution to the Canadian economy, remain a pole of regional development, and co-exist with other land users.

Declining Base-Metal Ore Reserves

As reported in Chapter 3 of this report, Canada’s base-metal reserves (at mines in production or committed to production) have declined continuously for almost 30 years. As a result of this prolonged decline, reserves in 2008 were equal to 45% of the 1980 level for copper, 43% for nickel, 40% for molybdenum, 18% for zinc, 17% for silver, and 7% for lead (Figure 3.2 and Table 3.6 in Chapter 3). The opportunity presented by increased prices over the period 2001-07 was not enough to reverse this long-term trend and the situation has been further exacerbated by the economic downturn. Consequently, Canada’s base-metal reserves continued their decline in 2008 and, given the outlook in the second half of that year and the first half of 2009, companies were not likely to increase their efforts to incrementally define new base-metal reserves at existing mines. Going forward, it will be interesting to follow the development of new base-metal projects and base-metal mining camps, and their impact on future reserve levels.

Land Access and Security of Tenure

Land access and security of tenure have long been identified as a major concern for Canada’s mineral exploration industry. Reductions in the area of land open for exploration and uncertainty regarding future land-use plans continue to be of concern to the industry. Notable developments in terms of land access and security of tenure in 2009 include:

  • Bill 173 (An Act to Amend the Ontario Mining Act) passed Third Reading in the Ontario Legislative Assembly on October 21, 2009, and the Mining Amendment Act, 200914 received Royal Assent on October 28, 2009. As a result, a number of important regulations affecting mineral exploration are in effect or will be proclaimed once they are developed. Measures include: notification and consultation requirements for planned work on Aboriginal lands, removal of Crown mineral rights on privately held lands in southern Ontario, the development of criteria to withdraw Crown mineral rights under privately held surface rights in northern Ontario, a revised list of lands not open to staking and exploration, and the future introduction of on-line map staking. In addition, Ontario’s Bill 191 (the Far North Act), introduced in June 2009 and at the Second Reading stage15 on October 22, 2009, proposes the protection of ecological systems in the Far North by including at least 225 000 km2 of the Far North in an interconnected network of protected areas.
  • Bill 79 (An Act to Amend the Quebec Mining Act [Projet de loi no. 79 - Loi modifiant la Loi sur les mines]) was tabled in the Quebec National Assembly on December 2, 2009. As in Ontario, this proposed act aims to address some of the issues raised by the general population with regard to the conduct of mineral exploration and mining activity. In addition to a number of other measures, such as those concerning site rehabilitation work, it proposes the introduction of a number of modifications to tighten up the claim-staking regime, to allow the withdrawal of lands from mining activity at the Minister’s discretion, and to refuse the granting of certain mining rights that would be in conflict with the objectives of other land users.
  • Other developments include the creation/expansion of parks (i.e., the Nahanni National Park Reserve of Canada in the southwest corner of the Northwest Territories was expanded over sixfold [from 4766 km2 to over 30 000 km2] in June 2009), the threat to exclude mineral exploration from certain high-ecological-value areas (such as British Columbia’s Flathead Valley where stakeholders commenting on this issue in 2009 have included organizations such as UNESCO, the Sierra Club, and the Association for Mineral Exploration British Columbia), and mounting opposition to exploration for radioactive commodities such as uranium and thorium (e.g., existing moratoria in Nova Scotia and British Columbia, a temporary moratorium on Inuit-owned lands in Labrador, a temporary moratorium in New Brunswick [lifted after the introduction of strict regulations in 2008], and public outcry and the threat of mass resignation by medical doctors in Sept-Îles, Quebec, opposed to a nearby uranium exploration project in December 2009).

Despite these developments, 19 million hectares of land were staked in 2008 (2009 statistics were not available) and claims in good standing covered 7.9% of Canada’s total landmass.

Infrastructure

Having the necessary infrastructure in place to support Canada’s future mines is an important issue. Ore reserves continue to be depleted or are costly to replace in mature mining camps, while many of Canada’s most promising deposits are currently being developed in remote or northern regions of the country. Whether it be roads, railroads, air strips, deep-water ports, or electricity-generating facilities, and whether these are financed entirely by governments, private companies, or through public-private partnerships, infrastructure projects can help open up entire regions to economic development and increase the standard of living and economic opportunities available to the local population. Well-known examples of infrastructure projects (proposed or under development) that could benefit mining projects, including strategically important project clusters, and surrounding communities include:

  • The extension of Highway 167 in northern Quebec: in its March 2009 budget, the Quebec government announced the $130 million extension of Highway 167 from Chibougamau to the Otish Mountains. The extended highway will facilitate access to projects such as Renard (diamonds), Matoush (uranium), and Macleod Lake (copper-molybdenum).
  • The Northwest Transmission Line (NTL) in northwestern British Columbia: on September 16, 2009, the federal government announced a $130 million commitment to help build the 335-km NTL. Part of the remaining $274 million, from a total cost of $404 million, would come from private industry, but the Government of British Columbia, which has committed to build the NTL, would bear the largest costs with a contribution that could reach a reported $250 million. Upon completion, the NTL would improve the economics of a number of significant mining projects in northwestern British Columbia, including Galore Creek, Kerr-Sulphurets-Mitchell, and Schaft Creek.
  • The Bathurst Inlet Port and Road (BIPR) project in Nunavut: this proposed deep-water port and permanent all-weather road would foster mineral exploration and production in the Kitikmeot region of Nunavut by reducing transportation costs associated with projects in this area and by lengthening the trucking season. A 50-50 joint venture between Kitikmeot Corporation and Nuna Logistics, the BIPR would be financed through a public-private partnership. Its Environmental Impact Statement is currently on hold with the Nunavut Impact Review Board. Examples of projects that could benefit from the BIPR include Hope Bay (gold); Izok Lake, NICO, Hackett River, and High Lake (all base metals); Gahcho Kue (diamonds); and Thor Lake (REE).

Other infrastructure projects with potential to contribute to mineral resource development include the proposed Nunavut-Manitoba Route, the proposed all-weather road through the MacKenzie Valley (Northwest Territories), the proposed Alaska-Canada Rail Link, the MacKenzie Valley Pipeline (which was the subject of a favourable Joint Review Panel report in December 2009), the completed 110-km access road to the Meadowland gold deposit in Nunavut, a proposed heavy-haul railway through Baffin Island, a proposed railroad link to the James Bay Lowlands “Ring of Fire” projects, and the proposed expansion of the Talston hydro-electric facility in the Northwest Territories.

PROJECTS IN THE NEWS

In recent years, the federal-provincial/territorial Survey of Mineral Exploration, Deposit Appraisal and Mine Complex Development Expenditures has collected information from as many as 851 project operations (Table 2.6 in Chapter 2). In 2009, the number of project operators surveyed decreased to 650 as a number of projects became dormant in the midst of the economic crisis. It should be noted that many of these 650 projects continued to progress along the mineral development curve, as reported to the investment community by public companies regularly disclosing related information.

There are so many interesting projects in Canada, and exploration is such a dynamic activity, that presenting a list of projects in the news in this report would be unrealistic and the information presented would quickly become dated. However, mining provinces and territories keep a close eye on permitted projects and provide valuable reviews and reports to the public on activities in their respective jurisdictions. The reader can access this information via the Internet links provided in Chapter 4 of this report. Between provincial/territorial information and company news releases, the reader can find ample information on projects such as James (direct shipping iron ore in Newfoundland and Labrador), Canadian Malartic (gold in Quebec), Renard (diamonds in Quebec), Hardrock (gold in Ontario), McFaulds Lake (nickel-copper-PGE-chromite in Ontario), Lalor Lake (zinc-copper-gold in Manitoba), Midwest Northeast (uranium in Saskatchewan), Jansen (potash in Saskatchewan), Mt. Milligan (copper-gold in British Columbia), Central South (metallurgical coal in British Columbia), White Gold (gold in the Yukon), Nechalacho (REE in the Northwest Territories), and Hackett River (silver-zinc in Nunavut), to name just a few examples.

OUTLOOK

The short-term outlook for the Canadian mineral exploration sector appears to be definitely more favourable in early 2010 than it was one year earlier. However, significant risks remain as governments must decide whether to tone down their fiscal and monetary response to the crisis or continue to stimulate the economy amid persistent worries about the strength of the economic recovery.

Factors that will determine which direction Canadian mineral exploration and deposit appraisal activity will take include continued strength in the price of gold; a more favourable demand outlook for base metals; continued interest in commodities such as potash, uranium, and REE; mining-friendly equity markets (helped by generally low interest rates); capital infusions by new project owners or partners; and positive news from the field.

Barring any further economic turmoil, 2010 could mark a return to exploration and deposit appraisal expenditure growth, but at a slower pace than that recorded before the economic crisis.

ENDNOTES

1 With contributions from Ginette Bouchard, Arlene Drake, Peter Trelawny, and Jianping Zhang of the Industry Economics and Taxation Division; Minerals, Metals and Materials Knowledge Branch; Minerals and Metals Sector; Natural Resources Canada.

2 In December 2009, De Beers Canada announced that it was proceeding with production ramp-up and construction of the previously suspended accommodation camp at the Snap Lake mine. Full production levels are expected to be reached by the end of 2012. De Beers was also planning to increase overall production at the Victor mine in the second half of 2009 to match improvements in economic conditions and demand.

3 On January 29, 2009, Baffinland Iron Mines Corporation announced that it was scaling back its activities due to global economic conditions. For updated information on Baffinland and its Mary River iron ore project in Nunavut, go to www.baffinland.com/Home/default.aspx.

4 After instigating an asset conservation plan in August 2008, Canadian Royalties Inc. completed critical construction activity, demobilized personnel, and protected on-site equipment at its Nunavik project in northern Quebec. The company was acquired by Jien Canada Mining Ltd. in November 2009 (www.jiencanadamining.com).

5 On January 7, 2009, Shore Gold Inc. announced that, in response to global financial and diamond markets, it would adopt a significantly reduced budget resulting in staff reductions at its Star and Orion diamond projects in Saskatchewan. Its focus was to remain on the completion of a pre-feasibility study and reserves calculation for the Star project and a resources calculation for the Orion project. For updated information on these projects, go to http://shoregold.com/index.php.

6 See TMX Group’s Mining Sector Profile at www.tmx.com/en/pdf/Mining_Sector_Sheet.pdf.

7 Gamah International Limited, Mining & Exploration Company Financings (MECO), November 2009.

8 Kitco.com, London PM Fix cumulative average.

9 See the Government of Saskatchewan’s December 17, 2009, press release on the Internet at www.gov.sk.ca/news?newsId=4c9d1ce3-a344-4b4e-a0f5-a1e02670cbea.

10 See the U.S. Geological Survey’s 2009 Mineral Commodity Summary on the Internet at http://minerals.usgs.gov/minerals/pubs/commodity/rare_earths/mcs-2009-raree.pdf.

11 Through its subsidiary Toyota Tsucho Corporation, Toyota signed a July 2009 letter of intent regarding properties owned by Great Western Minerals Group in New Brunswick and Saskatchewan. Also in July 2009, Canadian company Neo Material Technologies entered into a partnership with Mitsubishi Corporation to identify, develop, and commercialize REE opportunities outside of China. According to a January 7, 2010, report in The Globe and Mail, Magna International Inc. participated in a December 2009 equity financing valued at $10.5 million for a stake in Toronto-based Lithium Americas Corp., which owns the Salares lithium project in Argentina.

12 For more information on corporate social responsibility activity in the Canadian mining industry, see the web sites of the Department of Foreign Affairs and International Trade at www.international.gc.ca/trade-agreements-accords-commerciaux/ds/csr.aspx and the Prospectors and Developers Association of Canada at www.pdac.ca/pdac/advocacy/csr/index.html.

13 Bill C-300, An Act Respecting Corporate Accountability for the Activities of Mining, Oil and Gas Corporations in Developing Countries, is a private member’s bill tabled in the House of Commons by John McKay (Liberal Member of Parliament for Scarborough-Guildwood) on February 9, 2009. A copy of Bill C-300, which passed Second Reading on April 22, 2009, and was referred to the Standing Committee on Foreign Affairs and International Development, is available at www2.parl.gc.ca/HousePublications/Publication.aspx?Docid=3658424&file=4. When Parliament resumes on March 3, 2010, following prorogation, Bill C-300 will be reinstated and will still be under consideration by the Standing Committee.

14 For more information on Bill 173 and the Mining Amendment Act, 2009, please consult the Ontario Ministry of Northern Development, Mines and Forestry at www.mndm.gov.on.ca/miningact/miningact_e.asp.

15 For updated information on the legislative status of Bill 191, Far North Act, 2009, see the Legislative Assembly of Ontario web site at www.ontla.on.ca/web/bills/bills_detail.do?locale=en&BillID=2205&detailPage=bills_detail_status.

Note: Information in this chapter was current as of December 2009.

Note to Readers

The intent of this document is to provide general information and to elicit discussion. It is not intended as a reference, guide or suggestion to be used in trading, investment, or other commercial activities. The author and Natural Resources Canada make no warranty of any kind with respect to the content and accept no liability, either incidental, consequential, financial or otherwise, arising from the use of this document.

TABLE 1.1 TOTAL MINING EQUITY FINANCING RAISED IN CANADA AND FLOW-THROUGH-SHARE FINANCING, 1995-2009
Year Total Mining
Equity Financing		 Flow-Through-
Share Financing
($ millions)
1995 3 744 123
1996 6 632 220
1997 5 516 127
1998 3 039 55
1999 2 292 50
2000 1 655 102
2001 1 655 133
2002 3 477 192
2003 5 816 235
2004 6 721 473
2005 5 027 398
2006 10 633 628
2007 21 422 1 071
2008 11 547 625
2009 (a) 19 543 335

Sources: From 1995 to 2007, Gamah International finalized annual reports; for 2008 and 2009, Natural Resources Canada (compiled from Gamah International monthly reports).
(a) Eleven-month data (January-November).