Delegates attending the annual convention of the Prospectors & Developers Association of Canada (PDAC) in Toronto seemed more optimistic about their industry’s prospects, despite weakness in metal prices and reduced levels of exploration and capital spending. One major factor contributing to the upbeat mood was the recent introduction of enhanced tax credits aimed at flow-through share investments in Canadian mineral exploration.
PDAC President John Steele told delegates that, starting from a high of $160 million in 1997, domestic exploration expenditures by major companies had tumbled to $40 million in 2000. Similarly, Canadian exploration spending by junior companies fell to $52 million in 1999, from a high of $190 million in 1996. Outside Canada, senior companies spent only $220 million, and junior companies only $120 million, in 2000, down from highs of $425 million for seniors in 1996 and $460 million for juniors in 1997. Steele called the inability of the industry to raise exploration funds “a severe crisis.”
“The PDAC has dealt with several important matters this year,” Steele said, “but none approaches the severity of this lack of funding.”
Alarmed by the decline, the PDAC and other organizations successfully lobbied the federal government for an enhanced mechanism that would stimulate spending, particularly in rural areas.
Last fall, the federal government introduced a 15% non-refundable tax credit, over and above the existing 100% deduction of eligible exploration expenditures from federal taxes. Ontario, British Columbia, Quebec and the Yukon all added complementary deductions that apply to the provincial/territorial portion of income tax. Quebec’s is the highest, offering an effective break of 175% for some expenditures when combined with the federal write-off.
Ralph Goodale, minister of Natural Resources Canada, noted that flow-through financings (involving the tax credit) of about $30 million were completed before the end of 2000.
“The measure was the result of a grassroots campaign — an effective coalition led by David Comba and John Steele of the PDAC, the Canadian Diamond Drilling Association, and several members of parliament who clearly understood the benefits of exploration in their communities. These MPs — Robert Nault, Ben Serre, Brent St-Denis, Guy St-Julien and Reg Belair — were instrumental in bringing about this important measure.”
Access to capital was a constant theme throughout the convention. James McClements of Denver-based Resource Capital Funds, warned delegates that the problem goes beyond an investor shift to “new economy” ventures.
“Capital markets are also less forgiving of past performance, and the mining industry has a reputation for providing poor returns,” he explained. “The question these days for institutional investors is not What mining company to buy, but Should I be in this industry at all? And in answering this question, the main concern is whether the industry utilizes capital efficiently.”
McClements said the industry must also do more to win the hearts and minds of the broader community. “We are seeing several initiatives, including the “global mining initiative,” attempting to come to terms with the public perception of the industry. It is essential that this continues.”
David Harquail, vice-president of
As for industry consolidation, Harquail warned that the game is being won by industry giants from across the pond. “North American companies are small fish surrounded by sharks,” he said. “The really big companies are based in London, and they’re getting aggressive in our backyard.” He cited Rio Tinto’s takeover of Labrador Iron Ore and its involvement in the Diavik diamond project in northern Canada, Anglo American’s creeping takeover of Gold Fields, De Beers’ recent purchase of Winspear and Aber Diamond’s share of the Snap Lake diamond project (also in the Northwest Territories), and Billiton’s trumping Noranda for Rio Algom. “There is no doubt they will be after more North American companies.”
Diversity appears to have been the theme for the convention’s “New Discoveries and Developments” session, as suggested by such inclusions as the Perseverance massive sulphide project in Quebec, the Snap Lake diamond project in the Northwest Territories, and the Wallaby gold project in Australia.
Matagami discoveries
Starting off the morning sessions,
James Pickell of
Pickell noted that Triple Seven is now the size that the original Flin Flon deposit was when it was put into production in 1930. Before drying up 36 years later, that deposit had yielded more than 62 million tonnes of ore: “We plan to be in Flin Flon for the next 100 years.”
According to John McConnell of
Snap Lake hosts 22.8 million tonnes averaging 1.68 carats per tonne. The resource is expected to support a 3,000-tonne-per-day underground operation, starting in early 2004.
Among the smaller gold projects reviewed was Julietta, in far-eastern Russia. The project, operated and 79%-owned by
Bema Vice-President George Johnson said underground development should be completed by September. Local equipment shopping has improved project economics since the company acquired its stake in 1998.
On the geological side, Johnson noted that only eight of the 25-odd known quartz veins have been explored at great length, leaving wide open the potential for expanding reserves. At last report, reserves stood at 540,000 tonnes grading 25 grams gold and 407 grams silver per tonne, with another 600,000 tonnes averaging 16 grams gold and 280 grams silver classified as a resource.
Carosue Dam
The open-pit operation poured its first gold in December 2000 and will eventually be producing at the annual rate of 130,000 oz.
Processing is by conventional milling followed by recovery using a gravity circuit and carbon-in-leach technology.
Teck’s Australian subsidiary, PacMin, bought the Carosue property in 1998 and then drilled off a resource of 40.1 million tonnes grading 1.7 grams gold within a volcanic host rock on the western limb of a syncline.
Teck is pleased with the project and expects to bank a 27% after-tax return on its investment.
Geoff Handley,
Placer holds a 60% interest in the project and serves as manager, while Australia’s
“Wallaby is shaping up to be a large deposit,” commented Handley, noting that reserves were already pegged at 18 million tonnes grading 3.44 grams gold upon completion of a feasibility study last October.
Gold mineralization is hosted by a conglomerate on the edge of a sedimentary basin. The deposit was first identified by a bull’s-eye magnetic anomaly beneath more than 40 metres of overburden.
Peter Tegart, a managing director of
The project has run into trouble of late, with some political agitation and vandalism on-site, but Tegart insisted Manhattan will persevere.
Indeed, he was upbeat, saying there is evidence that more deposits will be found and that Tambo Grande is “growing into one of the most important volcanogenic massive sulphide districts in the world.”
Donald Lewis, vice-presidentof
Co-owned by Homestake, with 60%, and
The host lithology has been obliterated, prompting Lewis to describe the deposit as having been “autoclaved from the bottom up.”
In June 2000, resources were pegged at 355 million tonnes grading 1.17 grams gold, or 13.3 million contained ounces, but by January 2001, the tonnage figure had increased to 381 million tonnes.
Lewis said Homestake and Barrick are working together see if they can optimize Veladero with Barrick’s adjacent Pascua project, which is on hold until gold prices improve.
Platinum buoyant
The buoyant market for platinum group metals (PGMs) made exploration for platinum, palladium and rhodium a hot topic this year. Gordon Bassett, general manager of precious metals marketing at Johnson Matthey’s precious metals division in Wayne, Pa., kicked off the platinum group metals sessions with a conservative but optimistic overview of the market. He noted that both the autocatalyst industry and the Russian supply question will be key issues in future, but, to the disappointment of some, failed to provide any metal price forecasts.
With market fundamentals covered, it was on to geology. Setting the tone was Richard Sutcliffe, president of
Wilf Struck, vice-president of
As for international projects, William Eksteen, senior vice-president of
Geophysics
The conference also included a session on geophysical techniques, which have enjoyed a string of recent successes typified by the Triple 7 discovery in the Flin Flon camp and the Perseverance discovery in the Matagami camp. The moderator of the session, Roland Ridler, paid tribute to the geophysicist who first suggested the session be held, the late Heikki Limion. Ridler called the session “a perfect reflection of his personal philosophy — geophysics that works.”
John Gingerich, a geophysicist with
Robert Pansze of
Placer Dome’s Peter Kowalczyk discussed using geophysical techniques to find mineralization that has no geophysical signature — specifically the Carlin-type gold deposits of Nevada. Emphasizing that a geophysicist needs a geological model for his quarry if he is not to work in a vacuum, Kowalczyk listed several geological characteristics of Carlin-type mineralization that produce geophysical responses.
Magnetic surveys, for example, can be used to detect structure and sometimes indicate areas of geochemical alteration where magnetite is being destroyed. Electrical surveys, particularly resistivity, offer a chance to map favourable pyritic, carbonaceous and clayey horizons, and even seismic surveys can play a part in determining basin depth and marking geological structures.
Sessions on the socio-economic environment surrounding mineral exploration brought home the lesson that prospecting and development operate under the scrutiny of governments, outside agencies such as the World Bank, and the ubiquitous non-governmental organizations (NGOs).
Consulting geologist William Wolfe told the conference that exploration discoveries had come along in the Yukon and Northwest Territories, just as the old rules that had governed exploration and development of mineral resources were being replaced by a regime centred on impact-and-benefits agreements.
He reflected that the agreements frequently had provisions that were difficult to nail down, and that having “a sense of humour” on both sides was sometimes essential.
Ian Thomson and Susan Joyce examined the fluid political situation in Peru, which they pointed out has become the principal venue for Canadian companies exploring in Latin America.
Joyce said that in post-Fujimori Peru, there is a “climate of pervasive distrust” that forces mineral explorers there to work more directly with local and regional governments. Rural Peruvians are, she said, deeply suspicious of the central government, and there is no credible authority to assure them that benefits will come their way or that companies will act responsibly. She said mining companies will be wise to “build credibility” locally by being as transparent as possible in their dealings.
Thomson noted that NGOs were ever more powerful and sophisticated, and often operated with international organizations that could exert pressure in foreign companies’ home countries. He cautioned that these groups — while not philosophically opposed to mining — tend to judge the industry by its poorest-performing member, and that their trust would have to be won by raising the standard of exploration practice across the board.
And the winners are . . .
Among the highlights of each year’s PDAC convention is an evening ceremony honouring those who have made outstanding contributions to Canadian mining. This year’s winners proved that diligent exploration and sophisticated technology can breathe new life into some of the most mature mining camps in Canada.
The Bill Dennis Prospector of the Year award was shared by the exploration team of
Ebe Scherkus, chief operating officer of
“The Abitibi camp is still an excellent place to do business and find new deposits,” Scherkus said.
Two well-known names in mining, Duncan Crone and Bruce Dunlop, were presented with Distinguished Service awards for their lifetime achievements in geophysics and prospecting, respectively.
Crone thanked numerous mining companies and the Geological Survey of Canada for their support of his geophysical endeavours, which included development of a directional down-hole probe that later benefited the HudBay exploration team.
Dunlop used the ocassion to plug Manitoba, where he spent much of his career. “It has the best geology in Canada.”
Prospector Frank Hoey, who celebrated his 100th birthday last fall, was unable to attend the ceremony to receive his Special Achievement Award. Hoey was honoured for his involvement in the PDAC as a past director, and for being the first centenarian to receive a PDAC award.
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