Exploration and deposit expenditure expected to increase

22nd July 2011 By: Tracy Hancock - Creamer Media Contributing Editor

Canada’s mining industry continues to rally from the recent global recession, with this year’s production currently exceeding that of 2010, reports government department Natural Resources Canada (NRCan).

Commodity demand is also strong, increasing the prices of many commodities, says NRCan director of industry, economics and taxation James Lauer. Canada’s total mineral production for last year was valued at $41.3-billion, which is $11-billion more than 2009’s production.

In 2010, Canada ranked first globally for the production of potash; second for uranium production; third for aluminium and titanium concentrate production; fourth for elemental sulphur and nickel production; and fifth for platinum-group metals, chrysotile, molyb- denum, salt and cadmium production.

The country produced 9.7-million tons of potash, worth $5.7-billion, which is a significant increase, compared with 2009’s four-million tons, worth $3.4-billion. Uranium production increased to 10 152 t, up from 10 113 t in 2009; however, it decreased in terms of worth from $1.3-billion to $1.2-billion.

Further, the value of metals increased significantly to $20.7-billion, compared with $15- billion recorded in 2009. Nonmetals increased in value to $15-billion, up from $11.4-billion, while coal production increased to 67-million tons, worth over $5-billion, up from 62-million tons, worth $4.4-billion.
In 2010, Canada produced over 11-million carats of diamonds, worth $2.3-billion. In 2009, the country accounted for 9.1% of the world’s diamond production, in terms of volume, which was about 124-million carats.

The country’s 2010 diamond exports were valued at $2.9-billion, a 38.6% increase, compared with $1.9-billion in 2009.

Lauer also notes an increase in exploration and deposit development expenditure in 2010, which, this year, are expected to increase along with capital investment.

At $3.2-billion, the department expects this year’s spending intentions to bring the exploration effort back to the record-setting trend that prevailed before the economic downturn.

This year, 85 companies plan to spend more than $10-million each, which accounts for more than $2-billion in spending intentions, 65% of the total $3.2-billion forecast. This proves that funding remains accessible for high-quality projects, says Lauer.

Precious metals, mainly gold, remained the leading commodity target last year, accounting for 52% of all expenditure. The base-metals group was second with 19%, while uranium accounted for 7% and diamonds for 4%.

“Other commodities, including ferrous metals, coal and nonmetals (mainly potash) accounted for the remaining 18%. In this commodity group, which has attracted increased attention in recent years, spending on ferrous metals rose by 103% last year. Meanwhile, expenditure for other metals, including chromite and rare-earth elements, increased by 35%,” he states.

Further increases are expected this year in all commodity groups except diamonds.

Meanwhile, the strong gold price and the industry’s positive future outlook are expected to increase the current precious metals exploration and deposit appraisal of $1.6-billion to the record expenditure levels recorded in 1987 and 1988, maintaining them as the pillar of mineral exploration and deposit appraisal in Canada.

Last year, the country’s mining and minerals processing industries, which comprise mining and quarrying – excluding oil and gas – non- metallic mineral products manufacturing, primary metal manufacturing and fabricated metal products manufacturing, contributed a total of $35.1-billion, or 2.8%, to Canada’s gross domestic product (GDP) totals.

“This represents an increase over 2009 GDP values, which totalled $32.1 billion. GDP is a function of production volumes and prices, both of which were up in 2010,” says Lauer.

Last year, Canada also remained the top destination for global exploration, attracting about 19% of the budget for worldwide exploration spend. In 2009, the country accounted for 16%.

Further, there has been a significant decline in proven and probable Canadian mineral reserves over the past 25 years in major base metals.

The most dramatic decline, over 80%, was seen in lead, zinc and silver reserves, while copper and nickel declined by over half. Gold reserves in 2008 were around half of the levels recorded in 1995.

Updated information concerning Canada’s reserves is expected next month. “The US remains Canada’s largest trading partner, accounting for 53% of Canada’s total exports. The US is followed by the UK (15%), China (6%) and Japan (4%),” says Lauer.

Last year, export trade with the US increased from $36-billion, recorded in 2009, to $45-billion, while exports to Japan were valued at $3.4- billion, improving from $2.9-billion in 2009.

Canada’s total mineral exports improved significantly, to $84-billion, compared with 2009, which yielded $66-billion.

In terms of Canadian mining companies’ foothold in the African mining industry, Lauer says, in 2009, Canadian headquartered companies had $20-billion, in assets in Africa. The department is currently updating this database for 2010 and it should be completed by the end of August.