Overview of Trends in Canadian Mineral Exploration 2009
3. Canadian Reserves of Selected Major Metals, and Recent Production Decisions
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Arlene Drake
The author is a senior exploration analyst with the Minerals and Metals Sector,
Natural Resources Canada.
Telephone: 613-992-7568
E-mail: arlene.drake@nrcan-rncan.gc.ca
RESERVES OF SELECTED MAJOR METALS
In the 28-year period from 1980 to 2008, Canada’s reserves of base metals declined continuously at annual average rates varying from -2.5% for nickel to -8% for lead. This period of prolonged decline resulted in reserve levels of less than half of the known ore reserves reported at the end of 1980. Reserves in 2008 were 45% of 1980 reserves for copper, 43% for nickel, 40% for molybdenum, 18% for zinc, 17% for silver, and 7% for lead. Gold has seen an increase of 115%.
During 2008, metal prices for all commodities declined from the highs reached in the previous year, but were still above historical averages. The severe collapse in metal prices was triggered by the financial meltdown in the United States and resultant global recession. Copper averaged US$3/lb, nickel averaged US$9.50/lb, and zinc and lead averaged under US$1/lb each. Gold remained high throughout the economic turmoil to average US$872/oz and silver averaged US$15/oz. All metals reached annual peaks in March and declined by year-end. By December 2008, copper was selling for US$1.39/lb, lead for US$0.44/lb, zinc for US$0.50/lb, and nickel for US$4.39/lb. Gold had declined to US$750/oz and silver was at US$9.40/oz.
As a result of this sudden economic downturn, the expansive effects of recent record prices were canceled by the negative, sharp, and quick responses of companies to the crisis. Marginal mines were placed on care and maintenance or closed, development projects were halted, and the anticipated increases in total metal reserves in Canada did not occur. In 2008, only molybdenum reserves (+4%) increased. Decreases were recorded in the reserves of zinc (-16%), silver (-14%), lead (-7%), nickel (-4.5%), gold (-4%), and copper (-1%).
The increase in molybdenum reserves is due to additions from the Gibraltar mine in British Columbia. The Gibraltar mine was also responsible for significant increases in copper reserves. Vale Inco recorded significant decreases in nickel reserves at its producing mines in Sudbury. Increases in lead and zinc reserves from new resources at existing mines were matched by larger declines in reserves at mature operations and mine closures at marginal deposits. Table 3.1 illustrates the main components of change in Canadian reserves in 2008.
At the time of writing, the deteriorating economic and financial conditions appeared to be improving. According to a July 2009 International Monetary Fund (IMF) report, world output is expected to recover gradually in 2010. As the global economy recovers, the prices of most minerals and metals should rally. In 2010, the prices of most minerals and metals are expected to rise, in part because of growth in the emerging economies, improving consumer demand in developed economies, and constraints on the supply of some commodities.
Reserves Policy
Canadian reserves are estimated from information contained in annual and other corporate reports, and from the responses of mining companies to the annual Federal-Provincial/Territorial Survey of Mines and Concentrators. Reserves reported here include only metal contained in material that is classified by companies as “proven reserves” or “probable reserves” at producing mines and in deposits that are firmly committed to production (Table 3.2). Metal contained in mineral resources classified by companies as “measured resources,” “indicated resources,” or “inferred resources” is not included in national totals, nor is metal contained in deposits that have not advanced beyond the deposit appraisal phase (Figure 3.1). When available, only metal contained in mineable ore is included in Canadian totals in order to exclude losses inherent in the mining process. Every effort is made to achieve, from year to year, consistency in the reserves reported here; however, consistency ultimately depends on industry practice, which has evolved over the years. Imperial units reported by companies have been converted to metric units and the results have been rounded to the appropriate number of significant digits.
Reserves by Commodity
Gold
There were 947 t of gold contained in Canadian mine reserves in December 2008. This represents a decrease of 4% (40 t) compared to December 2007. In Ontario, the Macassa mine in Kirkland Lake added gold reserves of 30 t while gold reserves decreased by 18 t at the Porcupine Joint Venture in Timmins and by 17 t at the Red Lake mine.
Silver
There were 5665 t of silver contained in Canadian mine reserves in December 2008. This represents a 14% decrease (923 t) compared to December 2007. Silver reserves are estimated to have decreased by approximately 437 t at the Caribou and Restigouche mines in New Brunswick. At the Brunswick No. 12 mine in New Brunswick, silver reserves were reduced by 133 t. Silver reserves at the LaRonde mine in Quebec were reduced by 125 t. At the newly opened Perseverance mine in Quebec, 20.6 t of silver reserves were added, and the Myra Falls mine in British Columbia added 14 t. The Red Lake mine in Ontario contributed an increase of 13 t in silver reserves and the Duck Pond mine in Newfoundland and Labrador added an estimated 8 t.
Zinc
During 2008, Canadian reserves of zinc declined by about 979 000 t (16%) to a year-end total of approximately 5.01 Mt. The greatest reductions in zinc reserves were recorded at the Caribou and Restigouche mines (366 928 t) in New Brunswick, at the Kidd Creek mine (137 150 t) in Ontario, and at the Brunswick No. 12 mine (110 400 t) in New Brunswick. The only increase in zinc reserves occurred at the Myra Falls mine due to the addition of new reserves (13 545 t) by exploration efforts to expand known resources.
Lead
In 2008, Canadian reserves of lead decreased by approximately 7% to a year-end total of 636 000 t. In New Brunswick, lead reserves decreased by 154 930 t at the Caribou-Restigouche mines and by 45 600 t at the Brunswick No. 12 mine. The Kidd Creek mine in Timmins, Ontario, registered a relatively modest increase of 98 410 t and the LaRonde mine increased lead reserves by 53 160 t.
Copper
In December 2008, Canadian reserves of copper were estimated at around 7.456 Mt, a decrease of 1.4% (109 000 t) from one year earlier. The addition of 294 327 t of copper reserves at the Gibraltar mine in British Columbia was the largest reserve change. Drilling on newly acquired ground has extended the Gibraltar deposit (Gibraltar Extension) and significantly increased reserves. Increases were also recorded at the Fabie Bay mine (16 999 t) and Kidd Creek mine (5420 t), and small increases were recorded at Duck Pond and at Vale Inco’s Manitoba Division. Copper reserves at the Highland Valley mine in British Columbia decreased by 91 280 t and Vale Inco’s Ontario Division decreased its reserves by 60 740 t. The Mount Polley mine in British Columbia reported that copper reserves declined by 40 517 t, and the Voisey’s Bay mine in Newfoundland and Labrador decreased its copper reserves by 38 030 t.
Molybdenum
Canadian reserves of molybdenum stood at 222 129 t in December 2008, a slight 4% increase from 2007, due principally to expanded reserves at the Gibraltar mine (18 809 t) in British Columbia. Significant decreases were recorded at the Endako mine (6762 t) and also at the Max mine (1327 t) in British Columbia.
Nickel
In December 2008, there were some 3.605 Mt of nickel contained in Canadian mine reserves, a decrease of approximately 4.5% from 2007 levels. The two largest decreases in nickel reserves occurred at Vale Inco operations. Vale Inco’s Ontario Division reported nickel reserves of 115 590 t less than in 2007 and Voisey’s Bay nickel reserves declined by 80 340 t. Xstrata Nickel reported decreases of 15 410 t in nickel reserves at its Montcalm mine due to lower-grade ore as the mine approaches the end of its life. The Raglan mine in Quebec experienced a decline of 15 110 t. Some 54 097 t of nickel reserves were added from the new Bucko mine in Manitoba.
Nickel reserves in the Sudbury region decreased by approximately 100 000 t resulting from the re-classification of reserves to resources and lower grades at mature operations. In 2007 and early 2008, Vale Inco and Xstrata intended to open/advance new projects in the Sudbury region, but economic conditions brought many of them to a halt. The Copper Cliff South mine, which gave access to the Onaping Deep project, was closed. In February 2009, the Fraser Morgan project was indefinitely deferred. The Craig and Thayer-Lindsley mines were closed in November 2008. Vale Inco’s Totten project is still expected to begin production in 2011, and Xstrata’s Nickel Rim South project could see production commencing in 2009.
Vale Inco had some 2.9 Mt of nickel in Canadian reserves at the end of 2008, or about 81% of the national total.
Canadian Reserves by Province and Territory
The same four provinces (Ontario, British Columbia, Quebec, and New Brunswick) continued to hold dominant positions in terms of Canada’s proven and probable mineable reserves of major metals in December 2008 (Table 3.4).
Ontario had 56% of the nickel, 42% of the gold, and 35% of the copper, plus 24% of the silver, 21% of the lead, and 20% of the zinc.
British Columbia had 100% of the molybdenum, 45% of the copper, 16% of the silver, 7% of the zinc, 5% of the lead, and 4% of the gold.
New Brunswick had 53% of the lead, 18% of the silver, 17% of the zinc, and less than 1% of both copper and gold.
Quebec had 35% of the zinc, 34% of the gold, 29% of the silver, 11% of the nickel, and 5% of the copper.
Manitoba had 15% of the zinc, 13% of the nickel, 8% of the silver, 6% of the copper, and 5% of the gold.
Newfoundland and Labrador had 20% of the nickel, 7% of the copper, 4% of the silver, and 3% of the zinc.
Nunavut had 12% of the gold.
Nova Scotia had 12% of the lead and 3% of the zinc.
The Yukon had 2% of the copper, 1% of the silver, and less than 1% of the gold.
Canadian Reserves by Industry Classification
Canadian mines are, to a large extent, polymetallic, a complexity that the North American Industry Classification System (NAICS) tends to oversimplify (Table 3.5).
In 2008, mine reserves of gold in Canada were distributed through the various NAICS classes as follows: Gold and Silver Ore Mining, 85%; Copper-Zinc Ore Mining, 10%; and Nickel-Copper Ore Mining, 6%.
In 2008, mine reserves of silver in Canada were distributed through the various NAICS classes as follows: Gold and Silver Ore Mining, 23%; Copper-Zinc Ore Mining, 55%; Nickel-Copper Ore Mining, 4%; and Lead-Zinc Ore Mining, 18%.
Mine reserves of copper in Canada in 2008 were distributed through the various NAICS classes as follows: Gold and Silver Ore Mining, 2%; Copper-Zinc Ore Mining, 61%; and Nickel-Copper Ore Mining, 37%.
Mine reserves of molybdenum in Canada were contained in the NAICS classes as follows: Copper-Zinc Ore Mining, 37%, and Molybdenum Mining, 63%.
Mine reserves of nickel in Canada were contained 100% in the NAICS class of Nickel-Copper Ore Mining.
Mine reserves of lead in Canada were contained in the NAICS classes as follows: Copper-Zinc Ore Mining, 26%; Lead-Zinc Ore Mining, 65%; and Gold and Silver Ore Mining, 8%.
Mine reserves of zinc in Canada were contained in the NAICS classes as follows: Gold and Silver Ore Mining, 12%; Copper-Zinc Ore Mining, 68%; and Lead-Zinc Ore Mining, 20%.
Apparent Life of Canadian Reserves
The apparent life (life index) of mine reserves is usually calculated by dividing the total amount of metals remaining in mine reserves at the end of a given year by the corresponding amount of metals contained in the ores produced during that year. Similar calculations are often applied at the national level.
At the national level, life indices are but a very rough measure of the expected life of aggregate mine reserves and they are often misleading unless abnormal situations are recognized. Life indices based on proven and probable reserves do not make allowances for inferred extensions to reserves at current mines, gross additions that will accrue to current reserves from the likely development, in the foreseeable future, of known orebodies for which a production decision has yet to be made, or expected changes in production rates. Furthermore, life indices tend to overstate the apparent life of reserves when, for example, annual production is abnormally low due to strikes, cutbacks, or suspensions at large establishments, or when significant increases in capacity resulting from new production decisions will be coming on stream, but only several years hence.
The apparent life indices for the major metals in Canada at the end of 2008 were 12 years for nickel, 10 years for copper, 9 years for gold, 7 years for molybdenum, 6 years for zinc, 6 years for silver, and 4 years for lead.
Reserve Trends
Figure 3.2 and Table 3.6 show how Canadian reserves of copper, nickel, lead, zinc, molybdenum, and silver have declined since the early 1980s. In contrast, gold reserves increased substantially until 1988 before beginning to decline.
Despite higher metal prices in 2007, rapidly escalating costs prevented the anticipated increase in reserves for most of the metals covered in this article. In 2008, the economic crisis dampened metal production and put development and expansion projects on hold. During 2008, molybdenum reserves increased by 4%, copper reserves decreased by 1%, lead reserves decreased by 7%, nickel reserves declined by 5%, silver reserves decreased by 14%, gold reserves decreased by 4%, and zinc reserves decreased by 16%.
The annual aggregate change in Canadian reserves is the net result of three main factors affecting individual mines (Figure 3.3): additions to reserves, deletions to reserves, and production. Additions to reserves are the result of new discoveries; new geological, metallurgical, production or other information; a decrease in production costs; or a rise in commodity prices, all of which increase the quantity of mineral resources that is profitable to mine. Deletions to reserves are the result of new geological, metallurgical, production or other information; increases in costs; or decreases in commodity prices, all of which reduce the quantity of mineral resources previously counted in mine reserves that are now expected to be mined at a profit.
The opportunity presented by increased prices over the previous seven years (2001-07) was not enough to offset the impact of escalating costs, labour shortages, and permitting issues/delays, and were exacerbated by a sharp downturn in global economic conditions. Therefore, Canada’s level of metal reserves continued its downward trend in 2008.
RECENT PRODUCTION DECISIONS
Several criteria need to be met for a project to be considered to have reached the production decision stage for the purposes of this report. In general, there needs to have been a positive production feasibility study, all of the necessary permits must have been obtained, financing must have been arranged, and directors must have approved construction.
Table 3.3 shows the production decisions that added to Canadian reserve totals in 2008.
In 2008, there was one re-opening of a mine with a production decision: the underground Bucko nickel mine in Wabowden, Manitoba.
A production decision made in 2007 for Xstrata’s Fraser-Morgan mine was reconsidered in 2008 and the project was put on hold. Nickel Rim South is scheduled for start-up in 2009; however, only resources are currently reported on this nickel-copper-platinum group metals (PGM) project in Sudbury, Ontario.
OUTLOOK
Falling metal prices and economic uncertainty have impeded the advancement of new projects, delayed development and expansion plans, and resulted in financial pressures at marginal operations. The 2009 outlook for Canadian reserves of copper, nickel, zinc, molybdenum, lead, and silver will depend on the timing of the economic recovery and the extent to which metal prices will respond to that recovery. For gold the outlook is more positive as the economic uncertainty continues to put upward pressure on its price and provide impetus for further reserve development activities.
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.
Source: Natural Resources Canada, based on company reports and the federal-provincial/territorial survey of mines and concentrators.
Source: Natural Resources Canada, based on published company reports.
. . Not available in published reports or estimated by author.
Notes: One tonne (t) = 1.1023113 short tons. One gram per tonne (g/t) = 0.02916668 troy oz per short ton.
| Project | Operators and Major Partners | Province | Metals |
|---|---|---|---|
| Bucko | Crowflight Minerals Inc. | Man. | Nickel |
Source: Natural Resources Canada, based on company reports.
Source: Natural Resources Canada, based on company reports and the federal-provincial/territorial survey of mines and concentrators.
– Nil or less than one unit.
(1) No allowance is made for losses in milling, smelting and refining. Excludes material classified as "resources." (2) Includes metal in mines where production has been suspended temporarily. (3) One tonne (t) = 1.1023113 short tons = 32 150.746 troy oz. (4) Excludes metal in placer deposits because reserves data are generally unavailable. (5) May not balance due to rounding at the provincial/territorial level.
Source: Natural Resources Canada, based on company reports and the federal-provincial/territorial survey of mines and concentrators.
– Nil or less than one unit.
(1) No allowance is made for losses in milling, smelting and refining. Excludes material classified as "resources." (2) Includes metal in mines where production has been suspended temporarily. (3) One tonne (t) = 1.1023113 short tons = 32 150.746 troy oz. (4) Excludes metal in placer deposits because reserves data are generally unavailable. (5) SIC = Standard Industrial Classification. (6) May not balance due to rounding at the SIC level.
Source: Natural Resources Canada, based on company reports and the federal-provincial/territorial survey of mines and concentrators.
(1) No allowance is made for losses in milling, smelting and refining. Excludes material classified as "resources." (2) Includes metal in mines where production has been suspended temporarily. (3) Excludes metal in placer deposits because reserves data are generally unavailable.
Note: One tonne (t) = 1.1023113 short tons = 32 150.746 troy oz.