Exploration spending is down across the board, but budgets for gold exploration have suffered less than other metals. And in two particular regions of Quebec – the established Abitibi gold belt and the emerging James Bay region – exploration drills are busily biting the rock.
The latest map of exploration drilling in Canada resembles a nighttime satellite image of the country: vast expanses of monochrome punctuated by clusters of brightness. If the clusters represented urban areas, the Abitibi greenstone belt straddling the Quebec-Ontario border would be a bustling metropolis and the James Bay region a small but growing municipality.
Despite a global slowdown in exploration spending that S&P Global Market Intelligence expects to continue into 2017, pockets of Quebec could be on the cusp of an upswing. The province’s share of Canadian drilling activity averaged about 30 per cent in the first nine months of 2016, reaching almost 40 per cent in August, according to analysis by S&P Global.
The provincial hotspots are at opposite ends of the exploration spectrum: the James Bay camp on the province’s western limit hosts greenfield projects, whereas the well-established Abitibi belt to the south hosts several producing mines. The latter is benefiting from the perception of safety while the former is attracting investors willing to accept greater risk in exchange for the potential gains associated with discoveries in an emerging mining camp.
Silver and specialty metals represent some of the targets, but the majority of Quebec’s drilling projects (11 of the 15 recorded in August 2016) are focused on gold, mirroring a worldwide phenomenon.
“Investors understand the gold sector better than any other commodity, so when the gold price goes up, they are ready to contribute to exploration by participating in financings or buying shares on the market,” said Gérald Riverin, president of Yorbeau Resources, which recently raised $1.28 million in flow-through financing for its gold and base metal projects on the Abitibi belt.
Gold climbed sharply in the first half of the year, touching a high of US$1,367 per ounce, before retreating to the US$1,300-per-ounce level by the end of the third quarter as the odds of an interest rate hike by the U.S. Federal Reserve increased amid stronger economic conditions in the country.
Thomson Reuters expects the price to rally further in 2017 as physical demand accelerates, matching the average US$1,420-per-ounce price in 2010. A recent Reuters poll of 35 analysts and traders returned a slightly lower annual average gold price forecast of US$1,331 per ounce if expected interest rate hikes in the U.S. come to pass.
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