Government apathy, low prices led to drilling industry’s `collapse’

Contrary to our federal government’s assessment that “Canadian mineral exploration is still on its long-term secular trend,” the diamond drilling industry is in a state of collapse. Exploration expenditures have decreased from a peak of $1.2-$1.5 billion in 1987, to $600-$800 million in 1990, to a predicted $400-$600 million in 1991. The government underestimated expenditures in 1987 and 1988 and has overestimated expenditures for 1990 and 1991. To an old diamond driller this secular trend is in the wrong direction.

The major decrease in drilling activity can be attributed to a number of factors. The changing of the rules in 1988 governing flow through share financing greatly reduced exploration expenditures.

The Canadian Exploration Incentive Program which was introduced in January, 1989 has been dropped by the government. To add to our problems, the price of most metals has softened in the past year.

Gold is off 10% and silver broke the US$4-per-ounce barrier for the first time in 14 years. Zinc prices are off approximately 25% on the year and lead is off 35%. Copper and nickel are the only significant metals where the current prices will generate exploration activity. If lack of tax incentives and low metal prices are not enough to stop exploration spending in Canada, the no-growth movement certainly will.

The federal and provincial governments must take action to define restrictive land use, settle native land issues and satisfy environmentalists in establishing guidelines for mineral exploration.

Mining companies will no longer spend significant funds exploring a deposit to be stopped cold by no growth groups and irrational environmentalists.

The eastern contract members of the Canadian Diamond Drilling Association continue to lobby the Workers’ Compensation Board (WCB) of Ontario to set rates in line with accident costs. William Mercier, a consultant, was employed on behalf of the eastern contract group in early 1989 and although he suggested a roll back could be expected it apparently did not materialize. The contractors’ fees were split on a pro rata basis by Ontario operating contractors.

The WCB has now suggested the diamond drill contractors (old rate 098) be consolidated with the contract mining group, which will increase our rate only further.

The WCB does not seem to understand that we do a considerable amount of work above ground in a quite different environment than mining contractors.

Diamond drillers are generally perceived as operators who wreak havoc with land and water having only a long shot chance of drilling a usable borehole.

Over the years the mining companies for whom we worked have been the judge as to acceptance of our practices. With growing concern as to what levels of disturbances are acceptable it is time for the CDDA to prepare a guideline for environmental practices. Frank Nolan and Gaetan Gagne have prepared a document entitled Environmental Considerations for CDDA which I feel is excellent. Their work should be continued and a formal CDDA Statement of Environmental Practices be issued.

The CDDA has continued to work with the Ontario Ministry of Skills and Development in the finalizing of Common Core Training requirements for underground and surface core drilling. The modules for underground personnel are complete.

Although I read that the implementation of the underground modules will take place on March 31, 1991, some of our underground operations have been subjected to the enforcement of the underground training for approximately one year. As with most new regulations a very real cost is associated with complying to the regulations.

The CDDA has worked together with the Prospectors and Developers Association of Canada in relaying statistics on exploration levels to government.

We had a slight embarrassment when unqualified numbers were used by Energy, Mines and Resources to conclude “To the end of August, 1990, total Canadian drilling footages were about the same as they were in 1989, the year with the third highest exploration.”

Our present method of accumulating drill footage statistics is not satisfactory. Perhaps a new system can be devised which will give a more accurate picture of our industry.

The various committees of the CDDA have been active during the past year. With the disastrous level of exploration activity in 1990 it has been difficult to progress in some areas, particularly membership. C.D. MacDonald is the president of the Canadian Diamond Drilling Association.