Base metal exploration activity sags on Canada’s West Coast

Mineral exploration spending in British Columbia has sagged to $90 million in 1991 from $190 million in 1990, and according to Jack Patterson, managing director of the British Columbia & Yukon Chamber of Mines, the collapse is continuing.

Patterson anticipates that 1992 statistics will show another 30-40% drop to the $55-60- million level.

A recent Vancouver Sun article quoted Patterson as saying the outlook in the province is gloomy. “A lot of the majors are wrapping up their exploration programs quickly and aren’t planning to come back next year,” he told the newspaper.

Patterson told The Northern Miner that the majors are doing less in the province for a variety of reasons. Lower metal prices are having an effect, but uncertainties surrounding aboriginal land claims, mineral tenure, and especially environmental regulations and mine approvals are having a greater impact.

The majors are currently examining their options, and deciding whether exploration in British Columbia is warranted in the face of a perception that they may not be wanted. (Early this year, Falconbridge closed its Vancouver exploration office and opened one in Santiago, Chile.)

The key to exploration spending decisions now being made may be the realization that attitudes in other countries such as Mexico, Chile and the Philippines have changed in recent year. These countries now eagerly welcome, and indeed do much to facilitate, mineral exploration investments. Patterson feels the implications of this situation are serious, and suggests that the provincial mining industry is undergoing a structural change and may never be the same. Both of the biggest sectors in British Columbia’s mining industry — copper and coal — are facing bleak futures.

Many of the province’s currently operating base metal mines are exhausting their reserves and will close during the next few years. Insufficient exploration has been done to replace this lost production, and several of the surviving mines are comparatively low-grade and operating on thin profit margins.

This downfall in metal production will occur just as other countries such as Chile and the Philippines are hustling new, generally higher-grade mines into production, wresting market share from Canadian producers. The lost market share will be difficult to recapture.

Bill Wolfe, manager of exploration for Cominco (TSE) in Western Canada, seconds Patterson’s comments. He notes that while some work is still being done by the majors in 1992, the junior exploration companies have pretty much disappeared.

There are some notable exceptions. The team of Bob Dickinson and Bob Hunter is hard at work advancing the Fish Lake and Kemess copper-gold projects, and exploration activity is also picking up steam in the province’s southeast, where several juniors are exploring for a “Sullivan-type” base metal target. Further north, Redfern Resources (TSE) is continuing to explore the Tulsequah Chief base metal deposit.

But Wolfe fears much less money will be spent on exploration next year. He says Cominco is moving a lot of exploration money out of the country, with 50% of its 1992 exploration expenditures being spent offshore and the likelihood that this proportion will rise in 1993.

Wolfe said he doesn’t see it getting any better during the next few years. “We are not replacing the mines that are closing; we could go without a mining industry,” he said.

Wolfe noted that if and when new deposits are found, companies face a difficult time doing anything with them. “A lot of companies,” he said, “are bothered by the Windy Craggy situation.”

Wolfe’s prescription? “We need to see a resolution to problems such as aboriginal land claims. We need to know where we can, and where we can’t explore. If the government decides they don’t want us, O.K. But we need to know where we can go, and, if government says we can explore in an area, then we need to know that we will be allowed to develop anything we find there,” he said.

Mineral discoveries are expensive as well, Wolfe added. “We tend to forget that a lot of money is spent on prospects that don’t become discoveries,” he said. “The risk/reward equation is out of kilter in B.C. There must be a reward for risk investment.”

Wolfe further points out that investment capital has no loyalty; it will go wherever it can get a decent return. “Government must realize how fluid capital is. It must support our advantages, like cheap power,” he said. Don Barker, a Cranbrook-based mining consultant, attributes the dropoff in exploration to an industry perception that the current provincial NDP government is a reincarnation of the damaging Barrett government of the 1970s. A strong supporter of stringent environmental regulations, Barker feels that both government and the mining sector must change the way they do business. Barker feels government must be responsive to industry concerns about environmental regulations and delays. “The biggest problem in permitting is timing

. . . many delays are for political reasons rather than technical analysis, the bureaucracy does not understand the high cost of waiting,” he said. Barker feels the most important contribution government can make is “to publicly and honestly welcome, defend and attach crucial importance to an industry they so desperately need.”

Barker does not let industry off the hook. He is concerned about the number of mine failures in recent years and the perception of incompetence these failures have created in world financial centers. “We must treat our investors better. We need better feasibility studies. We need to take steps to correct our problems.”

Barker also cites low metal prices and a global recession, and the vulnerability of the province’s mines with their comparatively low grades. “I do not believe that any new porphyry copper at 0.45% grade could sustain the capital cost to bring the orebody on line,” he said. “The new generation of copper zones found in the province grade about 0.2% copper and 0.013 oz. gold per ton.”

A staunch advocate of building a copper smelter in British Columbia, Barker believes such a facility could add 11% to the net smelter return of reserves in the ground.

— John Murray is a Nelson-based consulting geologist with a special interest in mineral resource issues.