EDITORIAL & OPINION — COMMENTARY — NDP blamed for poor BC image

A study released last year by the Fraser Institute has created the mistaken impression that British Columbia has a low mineral potential. The study, Survey of Mining Companies Operating in North America, was prompted by the devastating drop in mineral exploration in B.C. during the past decade as a result of policies of the provincial New Democratic Party government, including increasingly onerous regulations and uncertainty about land use. These have affected the mining industry and its investment climate, but not the province’s mineral potential.

The 85 senior and junior companies that responded to the survey spent a total of US$1 billion on exploration in 1997. Respondents were asked to rate 31 mining jurisdictions throughout the world, according to policy potential and mineral potential. The maximum rating for each was 100. For the policy potential portion, Nevada registered the highest score, with 90. B.C. was the lowest, with just five points. In the mineral potential portion, Ontario had a perfect rating of 100, followed by the Northwest Territories and Chile, both at 97. B.C. ranked sixteenth, at 52 points.

By combining the two indices, an investment attractiveness index was calculated. Nevada was highest at 81, followed by Ontario at 75, and Chile at 67. B.C. was near the bottom, with a rating of 3.

It appears that respondents have been so negatively influenced by the government’s adverse land-use policies that their judgment concerning B.C.’s mineral potential has been affected.

This is evidenced by high mineral potential scores for Alaska, the Yukon and Washington, all of which derive their minerals from the Cordilleran geological region. B.C., with its score of 52, also sits in this area.

The mineral potential of an area or jurisdiction can be described as the natural endowment of minerals in sufficient quantity and quality that they can, if discovered, be extracted and marketed economically. As experienced explorers know, such deposits are as difficult to find as a needle in a haystack. Obviously, within similar geologic terranes, mineral deposits may be highly variable in composition, size and grade. Numerous factors can affect mineral potential, including:

• the portion of land in a jurisdiction open to mineral exploration (in B.C., prior to 1992, this was about 94%, exclusive of settlements, with 6% protected in parks; by 2000, 12% of the province’s land will be set aside for parks);
• the extent of prior exploration and production;
• the extent of post-mineral cover rocks, drift, water and ice hindering exploration;
• knowledge of mineral deposit models for exploration purposes; and
• technological advances in exploration techniques.

Another measure of mineral potential, but one not necessarily recognized globally, is the presence of significant mineral deposits in a jurisdiction. These can have an immense impact on the generation of wealth, both locally and through taxation.

Of those jurisdictions on the Cordillera, Alaska boasts the Red dog and Kennecott base metal mines, the Yukon hosts the Faro and Vangorda operations, and Washington state has no significant mine at all. B.C. has East Kootenay, the coal mines of the northeast, Mount Klappan, Sullivan, Myra Falls, Highland Valley, Eskay Creek and Windy Craggy as significant deposits.

The province’s mineral endowment includes a diversity of significant mineral deposits. Although metal mining dominated much of this century, coal has traditionally accounted for about one-third of all solid mineral production. The East Kootenay coal district has been producing for more than a century and is estimated to account for about 75% of provincial production. Estimates of near-surface coal resources range up to 63 billion tonnes for the region, with 700 million tonnes classified as minable. Near Tumbler Ridge, the Bullmoose and Quintette coal mines have produced 89 million tonnes of coal since 1983, worth an estimated US$4 billion. Mt. Klappan contains a potential coal resource of 2.8 billion tonnes.

The B.C. metals sector is led by the Sullivan lead-zinc-silver mine, near Kimberley, which, since entering production a century ago, has provided about 25% of the value of the province’s historic metal production. Another major contributor is the Myra Falls lead-zinc-silver mine in Strathcona Provincial Park. Many significant copper deposits were discovered during B.C.’s exploration boom in the 1960s and 1970s. Among these are the Highland Valley copper deposits, from which 1.3 billion tonnes have been produced with a value of US$7.8 billion.

Eskay Creek, in northwestern B.C., is the world’s richest, small-scale gold-silver producer, with reserves of 800,000 tonnes containing a gold-equivalent grade of 1.69 oz. per ton. It ranks as the world’s fifth-largest silver producer and has one of the lowest cash costs for production, at US$132 per gold-equivalent ounces in 1998.

The drastic decrease in the value of B.C.’s mineral exploration in the past decade, to $40 million from $200 million, is directly related to the New Democratic Party’s land-use policies, which have hit resource industries, particularly mining, hard. Not obvious from the annual value of the mining sector’s producing metal mines (which averaged $1.5 billion in the past two decades) is the approaching drop in mineral output. Since 1990, only one mine has opened for every two that have closed. In order to sustain B.C.’s mineral output, exploration spending must increase. This will not occur until the current land-use policy is modified, as mining proponents have urged throughout the decade.

The mining sector in B.C. has historically shown itself to be the highest value generator of the resource industries per unit of land. Only 0.1% of the land base is disturbed, temporarily, and it is subject to reclamation.

There is nothing wrong with B.C.’s mineral potential. The problem lies in the inability of the current government to recognize its value and provide a climate that fosters investor confidence. A strong message is required from the government that adherence to regulations protecting the environment and rights of access and tenure will be upheld. Only this will remove the uncertainty resulting from protectionist land-use policies and overlapping, conflicting, confusing and frustrating requirements.

— The author is president of Vancouver-based Barrada Minerals.