Layoffs result as companies try to cust costs

Exploration is commonly the first area to be cut by companies when a slowdown occurs. It is also generally the last activity to start up again when economic conditions improve.

As an increasing number of junior exploration firms make the transition to producer status, that trend could continue with companies shifting emphasis from exploration to production.

Compounding the problem is the fact that many junior mining companies are still finding it difficult to raise venture capital for exploration projects with investors remaining cautiously on the sidelines.

One recent announcement involving exploration staff reductions came from Canamax Resources (TSE), which hopes to save about $2.5 million this year through a combination of various layoffs and the relocation of its executive offices to Vancouver.

Record low prices for uranium have led Cameco to lay off about 170 of its employees and undertake an extensive cost-cutting reorganization of its operations. The company had been one of the busiest exploration firms in northern Saskatchewan, with a diversified portfolio of gold and base metal projects, in addition to its uranium operations.

Earlier this year, Newmont Exploration Canada laid off its geological staff when the company decided to suspend its mineral exploration activity in Canada During 1988, Newmont had spent about $10 million on exploration programs which were directed from offices in Toronto, Timmins, Thunder Bay and Vancouver.

In another recent corporate reorganization, about 41 exploration staff were affected by the recent sale of Esso Minerals Canada to Homestake Mining Canada. More than 100 property holdings were involved in that deal, which is expected to reach completion later this summer or fall.

Several other junior mining companies have also reduced exploration staff from earlier levels. Noramco Mining (TSE), which a few years ago had been one of the most aggressive explorers in the country, is operating at much lower levels this year. To a lesser extent, some exploration staff reductions have also occurred at Aur Resources (TSE), although the company continues to remain quite active in northern Quebec.

Belmoral Mines (TSE) has cut back on its 1989 exploration and development programs after reporting a net loss of more than $7 million last year. Disappointing results were obtained on some of its exploration bets, including the Wrightbar and Canreos projects. The company’s Vedron project in Timmins was slowed down when it recognized the geology of the property was more complicated than originally thought. Belmoral’s recent annual report stated: “It is now apparent that considerable capital will have to be raised by the company to sustain a high level of exploration on the projects in Quebec, Ontario and Arizona.”

After recording a net loss of $30.4 million last year, Giant Yellowknife Mines (TSE) has a new operating plan which includes manpower reductions, curtailed mining activities in certain areas and a variety of other cost-cutting measures. The company is relying on its exploration group to find or acquire higher grade reserves which can be treated profitably by the company’s existing infrastructure. The company continues to explore its land holdings in the Timmins area, and has an underground and surface drilling program under way at the Giant Mine in the Northwest Territories.

Most senior mining companies, however, are continuing to enjoy good times for exploration and some have even beefed up the number of their geological staff. Companies such as Rio Algom (TSE), BP Canada Inc. (TSE) and Homestake Mining (Canada) have all been taking a more aggressive approach to exploration during the past year. Other major companies like Falconbridge Ltd. (TSE), Corona Corp. (TSE), Placer Dome Inc. (TSE) and Noranda Exploration all report high and sustained levels of exploration activity.

]]>