Dare to look up

The opening month of 2002 provided a few signs that the mineral exploration business may at last be turning a corner.

This year’s Cordilleran Roundup in Vancouver was the most successful in years, with more registrants and more exhibitors. And the mood was at last upbeat; there seemed a genuine feeling of hope, rather than the despair of the previous three years or the sense that “things must be getting better, because they can’t get much worse.”

As well, analysts at the investment houses that stayed with the mineral exploration sector — that is, the few firms that didn’t go unremittingly dot-com when that “industry” became a fashionable place to park mad money — have been making cautious suggestions that the market is a little more interested in their wares.

This is significant on two scores. First, a receptive market signals a change of sentiment about the industry itself, away from the cloud-cuckoo business plans that ruled the market bubble. Mineral exploration is a speculative business, but the reward is a thing of substance that you can load in a truck and sell to other people. If venture-capital investors are once again looking at making the big score in resource exploration, it is a definite sign that “old-economy” rewards are not going to meet the contempt they got in 1999.

Second, a little money could go a long way toward changing the climate in the junior exploration sector itself. Bull markets (and, we confess, bubbles) in junior exploration stocks traditionally get a large part of their energy from real discoveries by junior companies.

Consider the way the last upswing was driven by Dia Met Minerals’ diamond discoveries in the Northwest Territories. Dia Met’s success begat the market that financed Diamond Fields Resources, which, funded for diamond exploration, discovered the Voisey’s Bay nickel deposit in Labrador. And when nobody wanted to miss the next Voisey’s Bay, the excitement around junior exploration was palpable.

We can add that the excitement led to things like the Busang fraud, worked by a company that also rode the crest of the Territorial diamond rush, but there is a world of difference between the uncritical reception junior explorers got in 1996 and 1997 and the cold shoulder genuine and legitimate exploration projects got in the dark days of 1999 and 2000. A little enthusiasm for exploration ventures would not go astray: any warmth from the market now would be a campfire, not a conflagration.

And no discovery will light that fire until there’s money to drill some holes in the ground. That is why the encouraging signs from the market mean more than the chance for investors to make a little money. There is a chance for that money to do some real good in increasing the resource base and bringing some capital back to a very necessary activity.

That brings us to flow-through shares, which have been the backbone of financings for Canadian projects for the past two years. The two principal point sources of buzz these days are the North Slave and Otish Mountains diamond land plays, in Nunavut and Quebec — good ol’ Canadian staking rushes. Exploration on Canadian properties is eligible for the flow-through tax credit, which provides an important incentive for investors at a time when markets are sagging. This paper does not like to be an apologist for interventionism, but a well-timed tax incentive like the flow-through program can help an industry through dark days and provide the seed money that could mean a discovery and the return of the investor to the sector. (And take note, too, that with a tax credit, the money being used isn’t taxpayers’ money; the investor puts it up.)

Do we dare hope that times are changing and that the junior sector is emerging from its slump? Of course we do. That, in the end, is what exploration is about.