Mining industry looks into the next century

The 110 delegates who attended a recent Canadian Institute of Mining, Metallurgy and Petroleum (CIM) symposium in Toronto will have come away with much food for thought and not a little gloom to leaven their conjectures.

Purpose of the symposium, an annual event staged by CIM’s Mineral Economics Committee and this year titled “Mining 2001: A Canadian Odyssey,” was to divine what the future holds for the mining industry. Ten papers were submitted at the day-long session.

The conclusion was that although productivity has improved dramatically during the last 15 years, the mining industry cannot afford to rest on its oars. The achievement must be more than a one-shot effort. Striving for lower costs and higher productivity must be relentless if the Canadian industry is to survive.

“If we are not automated and robotized by the year 2000, we may not be in mining at all,” said Wil Bawden, quoting an unnamed source on underground technology. Bawden is head of the Department of Mining Engineering at Queen’s University.

In an all encompassing analysis, Pierre Larroque of the New York branch of Swiss Bank Corp. gave a sobering view of mineral demand trends in the U.S. While per capita consumption of a selection of the common metals, chemicals, paper and cement has not only reached a plateau, many of these basic building blocks of a modern Western economy are registering declines in per capita terms.

At the same time, growth in the U.S. population is slowing, indicating a net decline in mineral usage is in the offing. The U.S economy, in Larroque’s words, is reaching the “saturation” stage. Europe and the rest of the developed world lag in this regard and the demand for mineral products still remains healthy.

Larroque quoted the forecasts of analysts who are predicting 2.2%, 3.1% and 3.5% growths in copper, nickel and aluminum consumptions, respectively, in the medium-to-long term. Continued dumping of Russian nickel and aluminum will continue to drive prices down.

Quoting figures from a 1989 Nickel Development Institute report, Larroque noted that “substitution of nickel by chrome and molybdenum could conceivably occur should medium-term nickel prices consistently trade above US$4 per lb.” Ironically, during a presentation in Toronto last November to investors, Inco (TSE) stated that one of its objectives is “the achievement of satisfactory profitability at a US$4 per lb. nickel price.”

James Gill of Aur Resources (TSE) and David Watkins of Minnova (TSE) detailed Canada’s declining ore reserve base and the reduction in exploration expenditures.

Exploration expenditures peaked in 1988 at $1.5 billion while Energy, Mines and Resources Canada estimates no more than $500 million in 1993. Exacerbating the shortfall, said Gill, is the high cost of finding world-class orebodies. They either need deep drilling (for example, Inco’s Victor deposit at Sudbury, Ont.) or are located in remote areas requiring the importation of costly infrastructure (for example, the Izok Lake property of TSE-listed Metall Mining in the Northwest Territories).

Gill spelled out specifics on Canada’s orebodies in the world-class category: “Of the top 150 massive volcanogenic-sulphide deposits in the Precambrian Shield and Maritime regions, 13 contain about 70% of the reserves with just six making up almost 50% of the total metal content of the entire 150 deposits.”

Reserves of copper, nickel and zinc have dropped about one-third since 1981, Watkins said. But he pointed out that Canadian reserves of copper, zinc and gold have only marginally declined since 1963 with reference to the world’s reserves of the same metals.

“We are maintaining our position relative to our competitors,” Watkins said. “This being so, Canada should therefore be able to take steps to continue maintaining, or better yet, improving the situation.”