Death of an Industry: The Decline of Canadian Mineral Exploration – by Brent McNiven, B.Sc Geology, MBA-PM (October 2012 – Part 1 of 2)

Brent McNiven holds a B.Sc Geology from the University of Calgary, and MBA-PM from Athabasca University. Working in 12 countries in the Americas since 1993, he has been a business consultant involved in market and industry analysis, owned / operated various consulting and contracting businesses related to mineral exploration, and has extensive experience in cross cultural project management. Fluent in Spanish, he is a former resident of Peru, Venezuela, and Brazil. He can be reached at the following email address: sedex@shaw.ca

Executive Summary:

The purpose of this paper is to provide a qualitative overview of the state of the Canadian mineral exploration industry, and the changes observed over the past 15 years, and hopefully provoke meaningful discussion on future direction.

The junior mining and exploration sector that once formed a discreet, integrated and dynamic economic entity has become a fragmented and isolated group of investors / managers with narrow focus and short term (often short-sighted) mandates, operating too many companies (excess supply) lacking sufficient resources to be effective.

The contracting and consulting sectors have been sharply reduced in scope and capacity, and face increasing international competition, for example Australia, but also local actors in every market, resulting in consolidation, increased barriers to entry and lost opportunities.

Where Canada once produced world class exploration geologists, the failed industry / university link consistently graduates students without any field experience and lacking even the most basic exploration skills.

Competition for geology careers is fierce, as many low cost developing countries have improved quality (often trained by Canadian companies), and Open Education which should be considered a disruptive technology, is expected to continue this trend, offering affordable, high quality education to anyone, worldwide, eroding the advantage of Canadian universities, and by extension the potential value add of their graduates.

Overall this has resulted in a loss of international opportunities, and led to the replacement of Canadian companies, contractors and geologists by competitors both at home and abroad.

Canadian exploration activity has once again collapsed, while other countries exploration groups continue to operate without pause. Volatility in exploration is normal, however it is exaggerated in Canada compared to other countries, suggesting a dysfunctional industry skewed by structural deficiencies.

The observed changes are due to many internal and external factors beyond the control of any one group, and result in what is arguably the death of the industry as it was known.

The exploration industry is expected to retrench and focus on Canadian opportunities with a continued reduction in international activity, and with a corresponding reduction in opportunity for geologists.

Fundamental reforms will be required if Canadian universities, exploration geoscientists and exploration companies are to remain competitive.

It is critical that Government establish policies that will encourage the industry, reduce risk, and allow universities to leverage over a century of accumulated knowledge in mineral resource development.

Business as usual is not an option.

Metrics:

The findings are based on personal observations and field research conducted over the past two years, analysis of the market and industry undertaken over the past 20 years, and compared to a base line established during 2000/2004 MBA studies, where various sectors of the industry were examined in detail.

No attempt has been made to quantify the industry as that beyond the scope of this paper, however attention has been paid to establish trends, and where “most” is used it actually does reflect the majority of the observed cases.

In every qualitative analysis there will always be significant exceptions to the rule, and examination of these exceptions (outliers) will hopefully provide examples for future direction.

Much of what is contained within this document has been the topic of spirited discussion at industry conferences, and any time senior management meet, however up to now no comprehensive document investigating causal links has been presented.

Definitions for the Purpose of this Discussion:

Junior mining and junior exploration companies are those companies that do not produce ore, do not generate revenue, and (generally) depend solely on selling shares to investors in order to fund on-going operations.

Mining companies produce ore and generate the majority of their cash flow through value added extraction and processing of minerals.

A Project is a temporary group activity designed to produce a unique deliverable. Each project will have clearly defined objectives, a schedule, and budget. Project failure is considered to occur if the objectives are not met, or the schedule, and /or the allocated budget are exceeded, for example spending 100% of the budget and completing 50% of the work.

The term “market” as used refers to a specific economic sector in each instance, where forces of supply and demand are in effect, and buyers and sellers of services or products may conduct business, and is not restricted to financial or investment activities commonly referred to as “The (stock) Market”. The commercial activities related mineral exploration, include but are not limited to, mineral property (claims, concession, mines etc) owners, contractors, consultants, investors, other suppliers, junior companies and mining companies, whereby each sector offers services or product to others.

Classification of Geologists:

It is often said that it takes ten thousand hours of practice to become competent at whatever skill desired, be that playing a guitar or becoming a geologist, and because of this, no one geologist can hope to be good at all aspects of the discipline. Not all geologists involved in exploration are explorationists, and many others are researchers dedicated to advancing the scientific principles related to exploration.

Therefore, for the purpose of this discussion, geologists involved in exploration have been divided into three general groups as based on general skill sets, and areas of expertise. There is of course significant cross over between areas, and these categories are not to be considered rigid or exclusive.

Academic Geologists are those individuals dedicated to research and professional development intended to increase understanding mineral deposits, and development and optimization of exploration methodologies and frameworks. Academic geologists may or may not be associated with universities, do spend significant time in the field, and frequently are involved in the technical details of project planning, execution and evaluation (and hopefully justify their eye watering day rates). Many countries produce excellent academic geologists, and while Canada was and remains very strong in this sector, Canada has not, and does not hold a compelling advantage.

Exploration Geologists are those individuals primarily dedicated to the discovery and development of mineral (metals), who have extensive field experience, and while would still be involved in the field programs, focus on the geology rather than operations, preparation of (NI43-101) reports, liaising with investors and other administrative functions. Exploration geologists generally require support to set up and manage infrastructure to execute field project, and this is the “norm” in international exploration.

“Explorationist” Geologists are those individuals primarily dedicated to the execution and operations management of exploration projects. They possess a very broad cross functional skill set, and historically have been the project managers and /or project geologists responsible to design, execute and manage the exploration projects, regardless of where they are situated. The explorationist geologist function is critical to coordinate and integrate all aspects of the project with stakeholders, and has long been a critical core competency in the industry. Fundamentally, the explorationist core competency has been responsible in delivering low cost exploration in Canada.

Support staff without field experience regardless of what degree is held, are not considered “exploration geologist”. For example a GIS specialist without comprehensive and extensive field experience does not have the necessary criteria to evaluate data or output, regardless of what degree they hold, or the Administrative Geologist who has limited (or no) field experience, and whose career was spent in corporate office.

Introduction:

The following is based on an analysis undertaken during 2000 / 2004 that examined the Canadian public Junior Mining and Exploration industry from the perspective of operations and project implementation, and was updated and expanded based on observations over the past two years.

The Canadian junior mining industry is for many reasons unique with the following characteristics:

 Comprises disparate core competencies:
◦ Specialist cross functional exploration (as opposed to academic) geologists who focus primarily on the field exploration skills.
◦ An independent and tightly integrated financing / promotion function,
◦ An outsourced project generation function,
◦ An ephemeral outsourced operations function that is comprised of a highly variable group of contractors and consultants.

 Is highly agile and able to respond immediately to exploit opportunities as and where they occur.
 Management is heavily loaded towards non-technical (lawyers, accountants, financing), often with no technical (geologists, engineers etc) people in senior management positions.
 Project targeting both internationally and in Canada follows a “flavor of the month” chasing the latest fad, changing location, and commodities rapidly and constantly.
 Dependent on consultant geologists with strong project / operations management skills, operating on short term contracts, resulting in lack of continuity and high churn rate.
 Does not participate in the training, mentoring and or professional development of consultants.
 Project knowledge retention within the companies is very poor as data, and exploration teams, are discarded in cost saving measures at every downturn, and too often core project knowledge walks out the door with the consultants.

The findings indicate that the rate of change is increasing rapidly and to the point that:

 The combined financing and promotional core functions are healthy, dynamic and decoupled from exploration, to the point they are independent functions.
 Reduction in Demand: The senior mining groups e.g.: Placer, Noranda, Falconbridge, Cominco, Esso Minerals, et al, that once provided focused exploration support, and a ready market to purchase discoveries in most cases no longer exist, and where they do, are firmly established as international companies, and as such optimize their operations in markets that best serves their interests.
 Excess Capacity / Supply: too many junior companies lack strategic focus, instead responding to “flavor of the month” to obtain financing, and lack managerial and technical resources necessary to be effective exploration and development companies. Success is more a matter of “getting lucky” rather than sound planning.
 Specialist exploration geologists with the required broad knowledge base, and necessary years of experience, are an endangered species, largely replaced by GIS experts.
 Project generation is reactive, and based on what is sale-able to investors who are seeking full expenditure of investment to coincided with the end of the stock holding period.
 Flow-Through funding has created a mentality where exploration level stock has a zero value, and is discarded in favor of the attached warrant, or to achieve a tax loss.
 The junior mineral exploration industry is operating in a bubble whereby most companies are constrained to Ag, Au, U, REE +/- Cu, and have been pushed out of other commodities.
 Business / commodity cycles have decreased from 6 to 10 years, to 2 to 4 years, making it difficult to attract, train, and retain high quality talent.
 Increased competition mainly from Australian juniors and more importantly, their investors who continue to demonstrate ambition to build juniors into major mining houses.
 Increased competition from Australian consulting companies that have not shared the same level of market volatility, have expanded aggressively into international markets, and now dominate sectors that were once held by Canadian juniors and contracting / consulting groups.

The conclusions to be drawn are that:

 The decoupling of the core competencies eliminates the concept of “junior mining” as a discreet and comprehensive “industry”, and while there are exceptions, the market imposes a focus on discovery and sale, rather than become a producer.
 The “Senior Mining” sector no longer exists as a discreet Canadian entity, and a major component of the overall resource sector is now missing in action.
 The Junior Mining sector requires consolidation sufficient to align available resources with need. A reduction by up to perhaps 60% may be warranted before balance returns to the sector.
 The financing / promotion sector is an independent, dynamic and very aggressive industry in it’s own right, able to match opportunities and investors regardless of sector.
 Exploration contractors and geologists are now a service industry to the financing / promotion sector. As such, they no longer generate a discreet value add as once occurred, or would be expected to occur if the same work was done for a mining company.
 Increased international competition has eliminated the advantage held during the 90’s when Canadian juniors, and by extension the Canadian consultants and contractors enjoyed a near monopoly in the international market, and enjoyed access to uncontested opportunities.
 The lack of opportunity for university graduates to develop their careers since the 1998 / 2004 and 2007 / 2009 sector collapse resulted in a severe shortage of qualified talent, so that the consulting / contractor sector is no longer able to supply adequate levels of service, and that Canada now imports exploration geologists.
 Due to fundamental changes in the entry level exploration jobs market, comparatively (to historic levels) few opportunities exist for geology students to obtain summer work, resulting in too many graduating without any field experience, and lacking the necessary skills to become explorationists.
 Despite a general sense that things are not “right”, there is still a widespread view that Canadian geologists and associated industry are the worlds “best”, despite clear evidence to the contrary. Until a dispassionate analysis of the global industry and Canada’s place within it can be undertaken, then no appropriate response can be formulated and executed.

Historical Context:

The Canadian junior exploration industry was created by a particular and peculiar set of circumstances:

Supply:

Canada hosts extensive, large, and historically easily produced deposits that were frequently close to cheap transportation (this has changed), and that were exploited in turn depending on the requirements of the international market.

Government Policy and Support:

After the War of 1812, government policy directed that economic development be focused primarily on producing and selling natural resources, and significant government support and incentives were assigned to mineral exploration and mine development. The result was a world leading partnership of government / industry / research, that few (or no) countries have ever matched.

Junior / Senior Mining Partnership:

The existence of strong senior mining companies that served as industry leaders provided financial support for the junior sector and a market to purchase new discoveries, served as centers of excellence and development for advancing the industry, and were a critical component in ensuring universities were well funded, and had access to strong industry support. This partnership functioned as long as the Canadian market was protected, and international opportunities were not available.

Funding:

Government economic policy attracted, encouraged and rewarded investment. The financial and corporate regulatory environment encouraged widespread access to investment opportunities. Promoters worked closely with technical talent to identify opportunities, sell them to investors, and in turn explore them with an aim to open mines.

Critical Density:

Just as Silicon Valley is to electronics, Vancouver and Toronto are to mining, exploration and finance. The hundreds of companies jammed into these small regions ensured the concentration of contacts and information sharing necessary for the development of any high growth, entrepreneurial industry.

Market:

Canada was adjacent to the World’s largest consumer of natural resources for much of the past 150 years, and was involved in supplying material to major wars for more than 60 years, then undertaking the rebuilding of much of the World’s infrastructure after these same wars, and providing resources to the greatest period of economic expansion and growth in per capital consumption in history, with the rise of the North American middle class and associated “baby boom”.

Competent Contractors:

Drilling, geophysics, mining services, construction, and related contractual companies were innovative, competent, highly productive and talented, and possibly most importantly, were protected by sound contract law.

Limited Competition:

Few countries were economic sources of materials, until the changes introduced by the World Trade Organization (WTO) during the 1980’s. Until that time much of the World was effectively closed to foreign direct investment (FDI) for almost 100 years, mainly due to restrictive investment laws, political instability, repressive tax regimes, or expensive transportation.

The Uniquely Canadian Explorationist Geologist:

The requirement to explore vast areas of remote, difficult, and inhospitable terrain, with minimal resources, and short exploration season, demanded that the exploration geologist develop broadly based, cross functional skills that were unique in the world. No other country required that the geologist be tasked with anything but attention to the geology.

The explorationist combined a sound foundation in geology, and then through field experience and mentoring became proficient in project management, planning, HR, logistics, construction, contract negotiation and compliance, cost control etc, and in the process developed and applied innovative exploration solutions in geochemistry, geophysics, all manner of drilling techniques, and a host of related skills, including promotion and corporate management.

This skill set allowed individuals to accomplish what in the rest of the world required large companies with armies of staff.

Arguably, it was this combination of specialized exploration skills and knowledge base that set the Canadian exploration geologist apart from the rest of the world.

It can also be argued that the industries dependence on cross functional explorationists, resulted in an industry that now lacks a critical core competency, and has failed to adapt to change.

Internationalization and “International Entrepreneurship”

Changes introduced by the WTO during the 1980’s and early 90’s led to increased levels of FDI, and moreover permitted the phenomena later identified as International Entrepreneurship, whereby small companies or even individuals could invest and operate in most countries on equivalent terms, and with the same commercial rights as incumbent corporations. Up to this time only very large multinational companies for example Kodak, GM, IBM etc could hope to work abroad.

This created the environment that allowed the junior companies, contractors, and consultants to operate internationally, launching the highly entrepreneurial junior mining industry to leave Canada and seek new opportunities.

WTO induced change was directly responsible for the development of efficient transportation and logistics, reduced trade barriers, and most importantly, sharply reduced communications costs that in some cases were observed to decrease by over 95%, but also permitted these same countries to create directly competing industries.

The corollary is that what was good for Canada, was also good for others, and it did not take long before the local players in the various markets started to adapt and mature, and the Canadian juniors could no longer dominate.

Transition from National to International Operations:

During the 1980’s the mineral exploration industry in Canada was under increasing pressure from competing land use demands including First Nations land claims, anti-mining groups, populist Federal/Provincial regulations and international/local environmental groups, and an overall uncertain political environment.

The international market opening was combined with a big “push” by the expropriation of the Windy Craggy deposit by the populist British Colombian government, and the “pull” being offered by other countries who aggressively offered Canadian companies attractive incentives and preferential opportunities.

The heavily promoted Km88 Gold Rush in Venezuela was one of the first major international events that raised the profile (and made many millionaires), and by the mid 1990’s Canadian junior companies were operating worldwide, often in countries that many people did not know existed nor could find on a map.

After the Canadian companies broke out of North America in a big way, they had most of the world and any type of mineral deposits as “their” sandbox, and encountered everything from world class mines to spectacular failures.

Changes due to International Expansion:

Business Model Transition:

Historically the junior mining industry could be described as a loosely integrated but symbiotic relationship between usually fiercely independent individuals working in promotion, financing, project generation, and operations and none could survive or prosper without the other.

The resulting companies were fluid, often ephemeral, and commonly incestuous, but the community of actors was small, tight knit, highly productive, and the profits, losses and scandals that came out of it are the stuff of legend.

What had been a relatively integrated “industry”, rapidly decoupled after the WTO changes and international opportunities became available for example, when the promotion/financing core competencies found new opportunities in the dotcom, and biotechnology booms during a period when mineral exploration was comatose after Bre-X and the so called “Asian Flu” recession. New sources of investment from beyond Canada’s border were found in British and German stock markets, and soon after from Asia as it too opened to the world.

The move to international markets for operations and funding, resulted in a decoupling from the Senior Mining companies in Canada, and a loss of the supportive, symbiotic relationship. The senior companies were taken over, bought out or amalgamated into fewer entities, and the resulting entities had a more international focus. Pushed out of Canada by land claims and environmental issues, and pulled into new markets by excellent opportunities, the Senior companies left, and never looked back.

The response of the junior companies to the lack of demand by the Senior companies, was to become promotional vehicles joined at the hip with the investment community, focused on generating the short term results that could influence share prices, and provide profits for a limited number of participants, but did little to create long term value, or open new mines.

It became obvious that by 2000 the promotion / financing components had matured into an independent industry that is amazingly agile, innovative and quick to promote any (and all) opportunities regardless of location, and that mineral exploration would have offer equivalent rates of return if they wanted funding.

The demand to provide high rates of return over the short term resulted in a fundamental change in how exploration was conducted, and projects were managed. The result was the near elimination of long term, multi-phased exploration projects based on technical merit, and a concentration on “hit and run” short term efforts focused on obtaining high grade results that could be promoted, and if these were not immediately available, the project was too often dropped. This change in focus provided the opportunity for other countries actors to take over what had been, up to that time, a Canadian sandbox.

A prerequisite to achieve high rates of return (albeit in the short term) is to cut costs. The “iron triangle” of cost, time, quality is the primary constraint on any project. Pick any two, but you can’t have all three, so that if you want it fast and cheap, then quality has to suffer. Projects were too often underfunded, understaffed, demanded results in real time, and exploration fundamentals were ignored. In some (in)famous cases, $10’s of millions were wasted in advanced exploration without even so much as first producing a geology map.

The contraction from 1998 to 2004, and again in 2007 to 2009 resulted in the Canadian geologists, contractors and project generators being sharply reduced in numbers, and now form the rump of what had been a dynamic industry that once sold dreams of wealth to investors, undertook exploration worldwide, and in doing so opened the mines and creating the economic activity that helped give Canada one of the best standards of living in the history of the world.

Few students would consider entering mineral exploration when the history over the past 10 years is mainly of recession, short term contracts and underemployment, with the result that geology faculties adjusted, often by downsizing, amalgamating or changing focus to “earth sciences” or environmental issues.

The result is the so called 30:30 rule: anyone under 30 lacks experience, and if experienced staff are required, then they are those with more than 30 years of experience (and who are too old to do anything else). In effect we have lost three generations of exploration geologists, and now generally lack (there are exceptions) the senior people to mentor and train those few who elect exploration as a career.

Market Transition: National to International

During the opening of the international markets after the WTO changes, Canadian geologists initially dominated the exploration market primarily due to two reasons: the combined benefits of long term networking and contacts within the junior mining market, that effectively eliminated competition, and the specialized project and operations management (explorationist) skill set acquired by working in remote areas in Canada that no other country could match.

It is a given that exploration executives and managers will prefer to work with those from their own country (university) and during the 90’s when Canadian companies expanded internationally, they hired Canadian geologists and contractors, creating opportunities with minimal competition.

During the 90’s many exploration and operations offices closed and were moved to Peru, Chile, and Mexico, and increasingly staffed by locals who as expected hired their classmates. The Canadian head offices were often reduced to financing centers focused on investor relations, and too often ignorant of what was going on in their regional offices. The results were decreased opportunity for Canadian geologists, and a separation of interests between offices.

Shortly after the Canadian companies started to work in each country, the local actors started to catch up fast, learning from the expats and within a few years had displaced them. For example, exploration in Chile once dominated by expats, had by 1995/96 eliminated most of the expat horde, and Peru that opened for FDI in early 1995 and immediately attracted hundreds of expat exploration geologists, was by 1997 well along in substituting locals for expats, and by 1999 it was rare to see an expat in day to day operations.

By 2000 the once ubiquitous international opportunities for Canadian geologists had dropped to (relatively) near zero. While some limited opportunities do exist, they are the exceptions rather than the rule and often in places or conditions that few others would consider due to personal risk, but even there, Latino, UK and African geologists are becoming more common.

The Australian consulting and contracting industry provides a good basis for comparison. It is fundamentally different than the Canadian industry, and while a detailed market analysis is beyond the scope of this review, the basics are that Australians have continued to develop a support infrastructure of consultants and contractors that operate on a large scale with broad based infrastructure, and are more cohesive and better supported than their Canadian counter parts, who increasingly operate on their own.

The Australian and Peruvian consulting and contracting industry has taken significant share in Peru, which had once been almost exclusively Canadian turf, and Australians are increasingly their presence in most other active markets, including Canada.

While the Canadian approach was perhaps better (at the time) able to respond to short term, volatile and rapidly changing “flavor of the month” opportunities, the Australian approach is demonstrably better suited to support a mature (or maturing) market that focuses on mining and not stock promotion. The result is that Australian companies are increasingly exporting their core competencies internationally, and gaining market share.

The increased competition from international and local actors make it unlikely that Canadian consultants and contractors will dominate international markets, but could retain a position as specialist service providers.

Industry Health Indicators:

Economic theory demands that any industry change, adapt and innovate if it is to remain competitive. The process of creative destruction, whereby capital and resources are reassigned to more productive uses, and old companies destroyed and new companies are launched is the norm.

Key indicator activities can be used as a “canary” to gain an understanding of the overall economic health, and the in the critical contracting and consulting sectors we have seen the reverse, with the consolidation and overall reduction in laboratories, geophysical suppliers, full service geological consulting groups, and infrastructure support companies. These groups did not just provide services; they are critical incubators of future talent.

If the industry was healthy and generating value added opportunities, we should have observed a steady renovation and growth in full service geological consulting companies. Instead the market is still dominated by the same consulting companies who experienced sufficient growth during the 1980’s to achieve critical mass.

Since that time the market has been too small and fragmented to allow new entrants to generate sufficient, or continuous revenue to grow past being niche operators, and the market continues to be segmented. Many of the new new players entering the market are international competitors setting up office in Canada either through direct entry, or buying out local groups, increasing barriers to entry.

The obvious conclusion is that the Canadian market is no longer sufficient to support the current level or breadth of activity, and offers few opportunities for organic growth for home grown companies to acquire the necessary size and resources to compete, or for local talent to acquire the necessary skills once developed in these groups.

Talent – Lower Quality but Why?

At any meeting of exploration managers the conversation soon turns to the topic of the quality of geology graduates particularly with respect to their preparation for working in the field. Investigation indicates that this phenomena is not restricted to Canada, and (except for a few noteworthy international examples) stems from the fundamental change of the industry migrating from knowledge workers to data collectors.

The graduates are just as intelligent, motivated, and capable as any that came before, but too often lack even the basic field and project skills that have been the historic norm. While exceptional candidates stand out and are immediately scooped up, it is increasingly difficult to hire staff that are competent field geologists (not data collectors). In many cases candidates could not map (or read a map), use a compass, or identify the most basic rocks, although all were very good with a computer, and had a blind faith in their GPS.

The major factors identified as impacting the quality of the recent graduates are:

 Historically, geology students worked in the field during the summer, weeding out those unsuited to the job, and training the rest. That filter no longer exists, everyone graduates without experience, and it is up to the contractor to sort them out. Productivity is low, training periods long, and costs are high.

 Too many students elect the less rigorous “environmental” or generic “earth science” without advanced structure, mineralogy, mineral deposits etc and lack the necessary foundation for exploration. Instead they depend on computers, but lack the criteria to evaluate the output.

 Lack of continuous work and the severe impact of a cyclic industry make it difficult to attract and retain good people. Whereas graduates in Australia, Mexico and Peru can expect to work 12 months a year in full time geology jobs, Canadian graduates are offered short term contracts, that in many cases do not provide more than 3 or 4 months work per year.

 Mentoring once undertaken by senior geologists who actually spent extended periods of time working in the field, and who over the season would train and direct upcoming geologists no longer exists. It is very rare to find a senior geologist who has, or will spend any amount of time in the field, and even rarer, a company that will pay them to be there.

 Lack of opportunities to learn and apply the necessary ancillary skills necessary to become an exploration geologist e.g. projection management, applied geochemistry, geophysics, logistics, general administration, contract negotiation and compliance etc. In short all those skills that would continue the legacy of the Canadian Explorationist.

 Competition for entry level summer jobs once done by geology students is intense, particularly from First Nations who have been training their members and creating service companies after years of being encouraged to do so. Exploration companies can outsource for a fraction of the cost of doing it themselves, and are under increasing political pressure to do so.

 Replacement of geologists by lower cost alternatives. Wage demands do not reflect current economic reality and, at least until the current contraction, demands remained high which drove companies to seek alternatives. Economic theory states that (under normal conditions), wages are based on the value added to the project, and the level of responsibility the position requires, and not on the diploma. A graduate with no experience is at best a 2nd year equivalent (and one wonders why salaries are lower now than 1993). When demand is low, wages follow, and when demand is high, where wages once increased dramatically as per the rules of supply and demand, the current trend is moving towards either using fewer geologists and more local labor, or by the short term importation of affordable talent.

 Exploration is a knowledge industry, and productivity losses incurred by poorly prepared geologists is impossible to recover. Geologists have become data collectors and no longer develop knowledge, which reduces their value add, leading to lower wages, and continued loss of competitive advantage against short term imports.

 Surplus of geologists worldwide. The Canadian exploration and mining industries cannot provide meaningful employment to the number of geologists that graduate, creating a surplus that compete for decreasing training opportunities that would develop careers. International opportunities (other than short contracts in select countries) are rare due to competition caused by a surplus of good quality and low(er) cost geologists in other countries, who are commonly and increasingly found in every exploration camp worldwide.

As a result, many bright, motivated people are trying to enter the industry, and then are unable to find meaningful work, the necessary training, the long term career stability to encourage them to stick around and in the final analysis, they are frequently treated as a commodity.

Click here for part two of: Death of an Industry: The Decline of Canadian Mineral Exploration – by Brent McNiven

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