There’s only one way for metal prices to go — up

As predicted by John McOuat, president of Watts, Griffis and McOuat, and other mining executives, 1991 was a dismal year for exploration in Canada. While junior miners had problems raising risk capital, major companies were busy trimming workforce and redesigning corporate structure to maximize profit.

Meanwhile the flight of investment money to Latin America and elsewhere continues as companies grow weary of cumbersome permitting processes, high labor costs and unfavorable government policies. Some have deepened their roots in foreign soil that promises easily accessible orebodies. Others join the exodus to countries such as Mexico that have rewritten their laws to lure investors. Throughout 1991, executives shared with The Northern Miner their views and predictions of the industry’s performance in general and their companies’ direction in particular. A sampling:

The environment

The rush to tie up land in Mexico and to step up exploration in Chile continued throughout the past year. With its major assets in Mexico, Chutine Resources remains active in that country. “No environmental hearing is required there,” says Chairman Peter Holmes. “A lot of potential is awaiting exploration.”

Vancouver-based Bema Gold is seeking financing for its 50% owned Verde gold deposit at the Refugio property in Chile. Chairman Clive Johnson is discouraged by the cumbersome processes involved in getting mining permits in Canada. “We will still do the same studies in Chile to ensure the project is as environmentally sound as those in North America.”

Joutel Resources President Charles Page, however, seems unconcerned about the progressively restrictive environmental regulations at home. “We have a responsibility to our children,” he says. “I believe we can overcome these difficulties with our technologies.”

McOuat predicts Canada’s stiff environmental laws will not result in an exodus of risk capital. “The world will catch up with the type of environmental legislation enforced in North America. The discrepancy will disappear.”

An often debated controversy in 1991 was the cleanup order served by the Ontario government after a beaver dam caused Matachewan Consolidated Mines’ 20-hectare tailings pond near Matachewan, Ont., to overflow into the Montreal River in October, 1990. Failure to pay the hefty cleanup cost might put the company out of business and its executives in prison.

Alex Balogh, president of Noranda Minerals, believes that mines can be developed without causing environmental hazards. He thinks governments, which seem to be in a race to put senior managers in jail, will discover these executives have the same objectives of being environmentally responsible. “I am an optimist,” he says. “The law will finally become rational; otherwise, you cannot apply it.”

Meanwhile the debate over land use policy has held up development of some mine projects, Geddes Resources’ Windy Craggy in British Columbia among them. Mary Garland, Thunder Bay-based regional minerals specialist of Ontario’s Ministry of Northern Development and Mines, believes that Canada’s resource industries are in trouble unless an integrated land use policy can be developed. “There is a phenomenal amount of ignorance in the general public sector of just how important our mining industry is,” she says. “Some of the comments made by pro-environmental groups are quite damaging to the mining industry’s image.”

Metal prices

Another major setback last year was the slump of metal prices. But executives remain bullish. Gordon Bub, chairman of Black Hawk Mining which specializes in nickel, expects the metal’s price to reach US$6-7 per lb. by 1994. “By mid-1993, we are going to have a base metals cycle that will be reminiscent of the early 1970s when copper was US$1.80 per lb. (equivalent to US$3 of today),” says Pierre Lassonde, president of Franco-Nevada Mining and Euro-Nevada Mining. “Nickel will reach US$8-10 by the mid-1990s because of the lack of known reserves.”

As for gold prices, Lassonde predicts a turnaround by late spring this year. “Gold will be seen as an alternative currency to the U.S. dollar and the German mark,” he says. “Both the U.S. and united Germany have huge deficits.” Balogh also thinks the price of the yellow metal will pick up soon, probably before the end of this year.

“The gold price has been down for so long,” says Robert Gannicott, president of Platinova Resources. “There is only one way for it to go — up.” Exploration prospects

The rise of gold prices may not immediately trigger exploration activity, says Lassonde. “Gold producers will largely use their earnings to repair balance sheets.” The hunt for gold, he adds, will follow the revival of base metals exploration which should occur by mid-1993. Balogh, however, thinks people will start looking for the next Hemlo as soon as gold prices improve. In general, the prospects for mining and exploration are always “improving,” says David Rovig, president of Crown Butte Resources. “By that, I mean people in the mining and exploration business are classic eternal optimists, but also the nature of the business is such that at almost any given time, one segment or one commodity is showing improvement or promise of improvement.” Hugh Harbinson, president of Queenston Mining, shares Rovig’s optimism. “Canada is founded on natural resources,” says Harbinson. “There is no room for pessimists in the mining industry. We have to be dreamers.” Capital for exploration ventures may be available soon, but some believe it may be spent on foreign soil. “Small companies can raise money soon, but a high percentage of the exploration money will be spent outside Canada,” says Bub. Black Hawk, for one, has looked at three nickel projects in Africa. Although LAC Minerals has no intention of walking away from Ontario or being a non-Canadian company, Neil Westoll, vice-president of business development, notes that it is more difficult to find an easily accessible new orebody in Canada than in Chile and parts of the U.S.

Other companies, however, plan to maintain a high profile at home. “Canada still has a lot of mineral potential hidden under the overburden and by the rock,” says Alan Sauerbrei, Inco Ltd.’s director of exploration for eastern North America. “We have developed techniques that are leading us to these deposits.”

Joutel has no plan to join the exodus to Latin America. “We are based here and have a good handle on the Abitibi area,” says Page. “I believe a world-class mine is to be discovered in the area.”

Lassonde expects the rush to Mexico will peak in 2-3 years’ time. “I don’t see a major rush to Chile. The rush is stabilized.”

Canada’s global outlook, in fact, may eventually work in the country’s favor. “Mining is a worldwide industry,” says Peter Bojtos, president of RFC Resource. “Canada is exporting its technology worldwide. You need a homegrown farm to upgrade the technology. Only then can you export it.”