Too much emphasis on gold?

The mining industry’s heavy emphasis on gold is endangering the continuity of Canada’s base metals sector after the mid-1990s, warns the federal Department of Energy, Mines and Resources.

“A projection of Canadian base- metal production, on the basis of currently established ore reserves plus inferred extensions, with the addition of an optimistic mix of known promising deposits, shows that, on a national level, production of coppper, zinc and lead can be maintained at the current levels to the mid-1990s but, unless some major new discoveries are made soon, it will start to decline soon after that,” writes the department’s mineral policy sector in a recent monthly report.

“A moderate rise in prices, even if it holds, will not change the situation significantly.”

Exploration for precious metals (mainly gold) has risen almost 20 times during the past decade, from $14 million in 1977 to $260 million in 1985 (both figures in 1985 dollars), says the report. During the same period, precious-metal exploration has increased from 7% to 65% of total mineral exploration expenditures; the report notes that since the introduction of flow- through shares in 1983, there has been a marked acceleration in this growth.

Also, the report says most of the country’s mineral deposits newly discovered, brought into production and committed for production are gold plays.

In 1986, the report says major base metals (copper, nickel, zinc and lead) produced in the country had a value of about 2.5 times the gold produced ($4.2 billion compared with $1.7 billion). Reserves down, output up

While reserves of zinc and lead declined 20% and those of nickel and copper 15% between 1981 and 1986, productivity improvements led to over-all higher levels of base- metal production in 1986 compared with 1981.

In 1985 dollars, base-metal exploration expenditures fell from $90 million in 1977 to $70 million in 1985 (exclusive of a brief rally in 1980-81), or from 44% to 18%.

The report points out there is an average 6-year interval between finding a base-metal deposit and production start-up. “Given the lag between discovery and initial production, we have only a few years to come up with the major discoveries that must be brought on- stream by the mid-1990s if we are to keep up current Canadian production levels of copper, zinc and lead beyond that,” the report says.

Canada’s trade balance last year was helped by about $10 billion worth of minerals (excluding oil and gas) , says the report, with copper, nickel and gold each contributing about $1 billion and zinc and lead combined almost reaching $1 billion.

“Given that more than 80% of the copper, zinc and lead produced in Canada is exported, drastic declines in their production in the 1990s would imply a significant loss of export earnings,” says the report. Exploration continues

Meanwhile, exploration and development of base-metal prospects continues. In northern Manitoba, Hudson Bay Mining and Smelting and partner Outokumpu Mines say they will start producing nickel during the fourth quarter of 1988 from property at Namew Lake. The last underground nickel mine to open in Canada was Falconbridge Ltd.’s Fraser mine, in 1979, in the Sudbury, Ont., area.

In northern Ontario, Minnova Inc. and partner Zenmac Zinc plan a production start-up during the first quarter of 1988 at the Winston Lake zinc-copper mine, while in northwestern Quebec, Minnova’s Ansil copper mine is set to produce in late 1988 or early 1989. And in British Columbia, Minnova and Rea Gold are exploring a promising zinc-lead-copper-silver-gold deposit at the Samatosum property.

In Newfoundland, Noranda Exploration and the Selco division of BP Canada are drilling a copper- lead-zinc-silver-gold find at the Tally Pond-Duck Pond project. And, in Alaska, Cominco Ltd.’s Red Dog zinc-lead-silver project, to be the largest and among the lowest- cost zinc mines in the Western world, is scheduled to start production in 1991. It is estimated Red Dog has a production life of 50 years.