Editorial Alarm bells are ringing

From a recent presentation by Lionel Kilburn at a seminar sponsored by the Prospectors and Developers Association of Canada.

In the spring of 1988, two significant papers were presented by senior executives of large producing mining companies. Norman Keevil, president and chief executive officer of Teck Corporation and Robert Hallbauer, president and chief executive officer of Cominco Ltd. sounding the alarm about depleting base metal ore reserves. Several important points made bear seriously on prospecting and exploration.

1. Flow-through share funding has been directed primarily towards gold; and gold ore reserves are rising in Canada. Base metal ore reserves are falling significantly.

2. Although metal prices rise and fall through cycles, capital costs of production only rise. It should be noted that base metal production is more capital intensive than precious metals production.

3. Although industry has become competitive on an international basis, government has not. The rising capital costs of base metal preproduction must be complemented by tax regimes which allow reasonable levels of return competitive with other countries around the world.

4. Regulation of regional development and tax structures must provide Canada with `an edge’ to offset its natural disadvantages of climate and great distance. Once again this means an internationally competitive tax regime.

5. The lead time from start of exploration to production is 10 – 15 years and the base metal ore reserves are declining now. We must act now.

6. The strong Canadian dollar is the natural enemy of those who sell minerals internationally, but it is something with which we have to live as long as our economy is strong.

7. Gold mines do not produce the large numbers of jobs per ton mined that base metal mines do. They do not support as large a number of jobs in transportation, construction, power, infrastructure and processing.

Then what do we need for the future, according to these producers?

1. Sustained higher prices for minerals in the face of rising capital costs and rising cost of capital.

2. Better grade ore bodies in more cheaply accessible locations.

3. Something to replace `depletion allowance’ to encourage producers to get back into the exploration game.

4. Rebate of cost for certain high cost exploration expenses such as airborne geophysical surveys, provided the results of such surveys are made public within a couple of years.

5. Provincial financing of airborne geophysical surveys which are made available to the public immediately.

6. Flow-through share financing for base metal exploration, or for any other metals which are critically low in the national inventory.

What we really need at this time is an infusion of new ideas and new raw prospects. This means more money and more people directed to primary “grass-roots” prospecting. This means more prospectors, and such an increase in numbers can be achieved by providing the proper incentive and motivation to the prospecting industry through:

1. Capital gains treatment of any funds received by the individual prospector from the sale of his mineral properties.

2. A once-in-a-lifetime capital gains exemption of $500,000 for prospectors, as is provided at present to other high risk producers, such as farmers.

3. More realistic and competitive capital gains tax rates, or even better, the removal of capital gains taxes.

4. Specific financial assistance to prospectors for prospecting expenses, in the form of grants from provincial governments.

5. Prospector training courses available at reasonable or no cost in all of the provinces in Canada.

6. Greatly improved provincial and federal geoscience databases from which the prospector can work.

What does all of this mean? It means there will be more new ideas to generate more new mineral prospects; and more high risk capital available to explore, develop and produce them into more jobs, greater wealth and happier times for all Canadians.

It all begins with the prospector, his hard work and his new discoveries. Canada needs prospectors more than ever, right now.