PDAC Perspectives Exploration moving to greener pastures

The Canadian mineral industry ranks close to the top in the global production of 19 commodities. Energy News-Record, a New York-based magazine, places Canada third after the U.S. and Britain in the export of technological engineering expertise of which geoscience and mining contribute a very significant part. This competitive position stands out in stark contrast to the continuing criticisms being levelled at this country’s other business and industry sectors.

But how confident can we be that this will continue? Consider the following trends which are coincidental in time but opposite in direction. On the domestic scene, base metal reserves have been in decline now for the past decade, exploration investment and activity are continuing a serious downturn which began four years ago, and the political, fiscal and regulatory regimes combine to increase the level of uncertainty in Canada as an investment target.

The downturn in exploration investment is reflected in parameters that comprise the Prospectors and Developers Association of Canada’s national exploration data base, in particular the total number of claims staked and the number of line/km of airborne geophysics contracted by industry.

The individual trends of most of the provinces and territories follow the national trend. British Columbia, showing a slight positive trend, is an exception to this. Airborne geophysical activity, most of which occurs in the first few months of the year, shows in 1991 the lowest first-quarter levels since the early 1980s.

While Canada experiences a major downturn in exploration activity and investment, resource-rich nations in Central and South America, Africa and Asia have embarked on aggressive, and often creative, programs to attract investment.

According to a survey published recently by the Society of Economic Geologists, “mineral exploration by U.S. companies, as measured by average expenditures per company, increased approximately 8% in the U.S., decreased approximately 50% in Canada and increased 25% elsewhere in the world between 1988 and 1989. By comparison, average expenditures per company of the reporting Canadian companies roughly doubled in the United States, decreased by 20% in Canada and increased by 200% elsewhere in 1988 and 1989.”

To illustrate further, 82.6% of the $491 million of mining investment spent in Chile last year came from Canada. The siren call is difficult to ignore and money spent abroad is money not spent at home.

Globalization is a sound strategy and Canadian companies have been investing in the resource development of other countries for many years. However, it would be foolish not to acknowledge the current trends which indicate that mining investment is “moving to greener pastures.”

In order to realize our potential in the global metal market place and remain competitive, we, like the developing countries, must be aggressive and creative. As concluded in The World Competitiveness Report, published by the World Economic Forum and International Institute for Management Development, Canada’s use of natural resources is a major bastion of this country’s economy and its greatest strength in terms of global competitiveness.

Re-establishing investment and a stable economy in Canada seem particularly significant in the light of the current malaise arising from our national debt and the challenge related to finding the means to pay for government programs, including major environmental initiatives.