EDITORIAL PAGE Exploration needs renewed commitment

Difficult times call for a renewed commitment to exploration. From a public policy point of view, any hope of maintaining a strong mining industry requires finding the deposits that will be mined tomorrow. Legislators need to be aware that mining’s $20- billion annual contribution to the economy will not continue unless exploitable mineral deposits are found now. Major mining companies are well aware of the constant need to replenish ore reserves and, indeed, to add to those reserves in order to foster growth. That is why majors spend about $400 million annually on exploration in Canada.

From junior companies’ point of view, these difficult times are forcing many to cash in their best assets at low prices merely to survive. By the same token, a junior company that can withstand this low point will be in an excellent position to benefit when the upturn comes.

Indeed, exploration expenditures in Canada are dismally depressed, about half of what they were during the heyday of flow-through financing. Even compared to years prior to flow- through financing, exploration spending is, at best, flat.

But money alone may not be the best indicator of exploration success. Discoveries during the flow-through heyday of the mid- 1980s were many, but the successes did not increase in proportion to increasing expenditures. There was a declining rate of return, so to speak, largely due to the arbitrary time restrictions imposed on spending but also because the nature of mineral exploration is such that the wildcat discoveries we love to hear about usually follow years of gathering data.

While most of the flow-through funds were spent by junior companies, a company’s size is no indication of how successful it might be. Small companies can make discoveries and major companies can have no luck at all. Place Dome, for example, spent $88 million on exploration in 1989 and didn’t make any major discoveries while Eskay Creek, the major find of the year, is credited to juniors working on a shoestring.

Noranda Inc., on the other hand, is a major company that has made an expensive commitment to exploration and was lucky. It spent $84 million during the first nine months of 1990 and made one impressive base metals discovery (the Lynn deposit in Wisconsin) while advancing two other significant gold projects (Freewest and Moss Lake, both in Ontario).

All this is by way of saying that even though money for mineral exploration is scarce now, it is not the time to walk away from the industry in frustration. Now is the time for quality of work to take precedence over quantity.

For those who are tempted to throw in the towel, convinced that the Canadian mineral exploration industry has been pummeled by tax laws and will not be able to get up for the next round, it is worth noting that things are not much better elsewhere.

In fact, exploration spending in Canada this year is estimated to be about $650 million. According to a survey from Minerals Economics Group of Halifax, N.S., no other country in the world will enjoy such robust activity. Spending in Australia has been even harder hit than in Canada during the past few years, largely because of the anticipated 1991 gold tax. Spending in the U.S. is expected to remain flat. Exploration is increasing in South America and the Pacific Rim, but it is still far behind North America.

It may be naive to look for silver linings in clouds as ominous as those that envelop us now. Nevertheless, the demand for metals in the future will certainly not be any less than it is today. Eventually, the world will be beating a path to the door of those who offer the opportunity to find and develop those metals. In the past, Canadian juniors have shown they can do the job. There’s no reason to believe they won’t get another opportunity, and it could come soon.