Light at the end of the tunnel – by Norm Tollinsky (Sudbury Mining Solutions Journal – February 24, 2015)

Ontario exploration spending continues slide, but several projects advance to mine development

Exploration and deposit appraisal expenditures in Ontario were down significantly in 2014 – no surprise to junior mining companies, geologists, drilling companies and manufacturers of drilling consumables. But the news wasn’t all bad as the New Year dawned.

Revised estimates published by Natural Resources Canada in September pegged exploration and deposit appraisal expenditures for Ontario at $509.5 million, less than half the amount spent in 2011 and down again from last year’s total of $562 million.

Ontario still leads all other provinces and territories with 24 per cent of spending in Canada, but that’s down from Ontario’s 30.8 per cent share registered in 2010.

Gold continued to be the predominant target, accounting for $416.3 million of total spending for the year. Grass roots exploration took most of the hit, though several of the most promising projects crossed the threshold from exploration to mine development. By late January, gold had rebounded from its October low of $1,140 and was sitting at just under $1300.

“We had a very good run from the early 2000s,” said Rod Thomas, president of the Prospectors and Developers Association of Canada. “China was growing at double digit rates and there was a huge demand for commodities starting around 2003 all the way to the financial crisis in 2008… but we bounced back and the industry did really well until around April 2012.”

China consumes over 50 per cent of the world’s iron ore and approximately 40 per cent of all other metals, said Thomas, “so when China is growing at such a monstrous rate, there’s huge demand. Currently though, things are slowing down in China and Europe is wobbling along. The only bright spot on the horizon is the United States.”

Thomas sees some positives in the dramatic collapse in oil prices. It may not be such good news for Canada’s oil patch or for the federal government’s pledge to report a balanced budget, but it’s giving consumers in the U.S. an extra $125 billion a year to spend on cars, electronics and other consumer goods, and “when people start to buy things, that affects the underlying price of commodities, which is the business we’re in,” said Thomas.

“Investing in mineral exploration companies is very much driven by sentiment, so when commodity prices start rising, investors see that as an opportunity to invest. It’s that simple. The reality is you should be buying low and selling high, so now is probably a good time to start looking at companies and trying to determine which ones have the best projects and which ones have the best management. If you can identify those, then as long as you’re willing to accept the risk, it’s probably a good time to invest.

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