Editorial Investing in mining’s future

Canadian Mining Association President Norman Keevil Jr., armed with figures from the federal department of Energy Mines & Resources, has done much to publicize the decline in ore reserves of metals other than gold. He has challenged the industry to continue with more and better exploration for base metals in Canada in order to provide ore reserves that can be mined in the twenty-first century.

But some new figures compiled by Andre Lemieux at EM&R adds a new dimension to the problem. Since 1981, total production- sustaining investments at Canadian mine sites (in constant dollars) have declined almost 40%, an alarming figure. What’s more, it has been expenditures on gold that has kept mine-site investment figures from declining at an even greater rate. While investment in metal mines other than gold has been cut to less than half of the 1981 level, gold increased three-fold.

So, not only is exploration needed to find the Kidd Creeks and Sullivans of tomorrow, but mine site investment is critical to maintain production at existing mines.

“It will be necessary to emphasize base metals and to keep annual exploration spending * * * at the 1987 record level * * * for the foreseeable future if Canada is to find enough deposits to take over from those nearing exhaustion and keep up with expected growth in mineral demand,” says Lemieux.

“But that is only the first step. Annual mine site investments may have to be some four times as large * * * for Canada to hold on to its share of world markets beyond the mid-1990s.”

There should be no doubt in any quarter that maintaining Canada’s share of world markets is a high priority. In 1987, the last year for which figures are available, mining and exploration companies invested nearly $5 billion in Canada. That’s a lot of money, particulary when the multiplier effect it has is taken into consideration. What’s more, most of that investment — in fact, virtually all of it — is outside the urban areas that benefit from the growing but non-productive service industries.

About one-quarter of that $5 billion was spent on exploration. The balance, about $3.6 billion, was spent on production sustaining mine site investment: repairs of existing structures, machinery and equipment; outlining and preparing ore for production; installing new machinery and equipment; and constructing new buildings, underground installations and tailings ponds.

The high level of activity in gold, welcome though it is, masks the plight of base metal mines and nonmetallic mining operations, too. “Except for a slight rise in 1984-85, investment to sustain base metal production has been essentially flat,” says Lemieux.

It’s clear that increased investment is crucial, but it’s not easy to see where this increased investment is going to come from. The federal government’s aversion to foreign capital during the 1960s and 1970s has left a lasting legacy, one that will be hard to overcome.

The best hope comes from the mining companies and their shareholders. Their predecessors had the vision to establish an industry that has created incalculable wealth for themselves and for the nation. They, now, must see beyond the “poison pills” that serve only to thwart free market forces and invest the profits that are now accruing from high metal prices back into the industry.

Governments, too, must realize that while investment in more environmentally sound operations is necessary, a balance must be struck in order to permit investment that will also sustain production.

There is still great wealth in Canada’s mineral resources, but unless capital is invested today to develop those resources, it will be a long time before anyone can benefit from them.

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