Vancouver — For more than a dozen years, British Columbia has closed more mines than it has opened, and if this trend continues, only one metal mine and a few coal mines could be left operating by 2014. With stronger commodity prices and easier access to capital, there’s renewed hope this downtrend can be reversed, and at first glance, mining does appear to be turning the corner in the province. But the turn is more to the past than to the future, because, rather than discover and develop new mines, companies are focusing their efforts on reviving former producers.
Improved prices for gold, silver, copper and even coal have prompted a growing number of companies to examine mothballed mines and advanced projects that had been put on the back burner after commodity prices plunged in the late 1990s. These range in scope from the economically attractive Gibraltar and Mount Polley copper mines to smaller and technically challenging operations, such as the Carolin gold mine, near Hope.
This welcome flurry of mine-reviving activity masks a disturbing trend that began in the early 1990s, when government policies and land-use battles helped turn the province from a mining-friendly jurisdiction to one less welcoming of mineral investment. Even today, when it comes to the industry’s lifeblood of exploration, the outlook is downright anemic. Spending remains dangerously below the average of $226 million (in today’s terms) spent from 1976 through 1990.
In a recent submission to the British Columbia Mining Industry Task Force — a government committee examining mining’s future — industry executives pointed out that of the $2.7 billion of venture capital raised during an 8-month period in 2003, less than $50 million was allocated for mineral exploration in the province. The figure for the full year was a mere $55 million, even though 65% of Canada’s listed mining companies are based in British Columbia, including 71% of all TSX Venture mining companies.
Industry associations are “cautiously optimistic” that exploration spending will crack the $100-million-mark this year, largely owing to improved commodity prices. But even if it does, this level is still far below the $200-million level needed to sustain the industry’s future. The irony is that most industry executives still view British Columbia as one of the most geologically prospective regions in the world.
“There is something wrong with this picture,” stated Russell Hallbauer, chairman of the Mining Association of British Columbia (MABC), during a resource industry forum in Prince George last fall. “B.C. is a place with sparkling mineral potential, yet as a mining jurisdiction, it has lost its lustre.”
Hallbauer said exploration spending must be maintained if new mines are to be found and developed. “With no new mines coming on-stream to replace those nearing the end of their operating lives, it is just a matter of time before the province loses the better part of a four-billion-dollar, high-wage, job-generating industry in the heartland.”
Yet Hallbauer and other industry leaders believe British Columbia could once again be a powerhouse in the world of mining. “All it takes is determined government leadership — determination to protect and harness the mineral wealth of the province and deliver its benefits to the people who live there.”
These views were echoed by a recent Fraser Institute survey that rated the investment climate of mining jurisdictions around the world. Chile ranked highest overall, Nevada was rated the best in North America, and Quebec was tops in Canada. But British Columbia was viewed as having the most unattractive policies in Canada for new mining investment.
Liv Fredrickson, the survey’s former co-ordinator, says British Columbia continues to score low, year after year, despite its attractive mineral potential and recent changes in policy that are reversing damage done by previous governments.
“Perception of a jurisdiction’s business climate is as important as its actual policies,” she states. “Mining executives are becoming increasingly willing to invest their exploration dollars around the globe. Attractive geology is necessary, but not enough.”
Even the British Columbia Securities Commission urged the government’s Mining Task Force to take immediate action to mitigate factors that have deterred exploration in the province. Of these, access to land and security of mineral tenure were cited as “key policy flash points for investors.”
Specifically, the main problem areas identified are as follows:
— government bureaucracy adhering to a “control-and-restrict” mentality;
— the revenue-generating Ministry of Mines losing power in government with respect to mine development;
— government’s failure to protect the right of citizens to generate wealth from natural resources, for the benefit of all;
— problems with access to land and resources, and with the land-use planning process;
— unresolved native land-claims;
— lack of commitment to a 2-zone land-use policy for mining.
The industry points out that present and past mining activities in the province cover just 280 sq. km, or less than 0.03% of the province’s land base. Parklands, on the other hand, cover nearly 13% of the land base. This increases to almost 20% if the parkland category is expanded to include “Wildlands, Special Management Zones” and other restrictive zoning designations that most environmental groups tend to interpret as off-limits for resource development.
On a positive note, the industry is quick to praise the government when things are done right, such as new measures on the provincial sales tax, capital tax, flow-through shares, corporate tax, and the introduction of the Significant Projects Streamlining Act.
“For that, the mining industry is grateful,” MABC President Gary Livingstone told the task force. “However, despite these fiscal measures, the industry’s decline continues. Leadership on the more challenging issues of land use and security of mineral tenure has failed to materialize.”
Recent statistics on claim-staking in the province bear out the gloomy forecast. While the numbers climbed last year to more than 36,600 claims from 27,766 in 2002, they are still far below the 97,000 claims staked in the late 1980s and early 1990s, when the Eskay Creek discovery in northwestern British Columbia was still making front-page news. Most of the juniors active then have since been lured to more exotic and more favourable jurisdictions. The few companies that chose to stay are directing their efforts toward advanced projects, particularly in or near existing mining camps. Where the next generation of new mines will come from remains a multi-billion-dollar question, with no obvious answer.
Exploration may be at low levels, but several areas of the province are enjoying flurries of activity. Many of these hotspots are near existing mines — for example, a renewed effort to find possible extensions, or new deposits similar, to the grand old Sullivan mine, near Kimberley.
Stikine notes that previous drilling on its property demonstrated the same geological and mine markers and hangingwall stratigraphy that exist at Sullivan.
Farther west, near Kamloops,
In far-northern British Columbia,
Western Keltic considering advancing the project to production. Mining would initially focus on the higher-grade core, which contains an estimated 6.3 million tonnes grading 2.71% copper, 4.01% zinc, 46.5 grams silver and 0.52 gram gold per tonne.
In northwestern British Columbia,
Mineral-rich northwestern British Columbia was a hotspot for exploration in the early 1990s, and remains an attractive region to explore despite the lack of infrastructure, which drives up costs. Three high-profile gold projects explored by juniors and majors during the 1990s — Kerr, Sulphurets and Red Mountain — are now in the hands of
The Kerr and nearby Sulphurets deposits were previously examined based on a combined resource of 193.6 million tonnes at 0.49 gram gold and 0.57% copper, though a combined operation was not deemed economic at US$375 per oz. gold and US95 per lb. copper. Operating and capital cost projections were high, owing to the deposits’ remoteness.
About $40 million was spent by previous operators at Red Mountain, near Stewart, where technical challenges and problems related to accessiblity are a concern. The project has measured and indicated resources of 1.59 million tonnes grading 7.8 grams gold and 29.27 grams silver. Last fall, Seabridge retained Steffen Robertson and Kirsten (SRK) to carry out an engineering study on the total resource of 1.9 million tonnes grading 7.74 grams gold and 26.2 grams silver.
A 1,000-tonne-per-day underground mine and on-site mill with a grinding and cyanidation leaching circuit were examined, for capital costs of about $61.8 million. But with total production costs (inclusive of capital) averaging US$358 per oz., and in light of environmental and logistical challenges, the study recommended that more exploration be carried out to boost reserves while technical options are studied to find ways to reduce capital costs and improve project economics.
In the Galore Creek district, also in the mineral-rich northwestern corner of the province,
Near Dease Lake,
The Metla property has an exploration history dating back to the 1950s, when crews working for Cominco discovered an extensive area of polymetallic sulphide mineralization. Subsequent exploration efforts returned some high-grade gold assays, mostly from glacial float boulders.
Solomon can acquire the Metla property through cash payments and shares to the vendors and by spending at least $1.1 million on exploration.
In north-central British Columbia,
Farther south, near Vanderhoof,
In the Okanagan district,
The junior has retained Roscoe Postle Associates to prepare a preliminary feasibility study for the project. The Toronto-based consulting firm will carry out the work needed to upgrade a previous scoping study to the standard of a prefeasibility study.
This work is expected to include a review of the resource estimate, mine design and production schedule, geotechnical studies, metallurgical analysis, tailings disposal studies, other environmental and permitting requirements, and a comprehensive cost analysis.
Margaret Kent (formerly Witte) and partner Ross Burns are examining the past-producing Carolin gold mine, near Hope. Subject to a due-diligence review and regulatory approvals,
The mine was built at a cost of about $40 million in the early 1980s. At last report, it hosted diluted resources of 1.5 million tons grading 0.129 oz. gold per ton. Century plans to update a previous feasibility study and rehabilitate the existing 1,500-tonne-per-day mill. The property is near a paved road.
Exploration on Gold City’s Greenwood properties will focus on expanding the historical resource. The company is getting ready to take a 10,000-tonne bulk sample from the Grenoble-Main Zone on the Lexington property. Gold City plans to construct a 200-tonne-per-day mill near the Lexington and Golden Crown properties and hopes to start production this year.
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