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TORONTO — Big mining companies may be pulling back on major new spending plans, but they haven’t let up on exploration budgets, according to Major Drilling Group International Inc., which has a bird’s-eye view on the mining world as the second-largest resource driller.
Chief executive officer Francis McGuire says the same cannot be said for junior miners, which have been stripped of access to financing amid tumultuous global markets, forcing them to virtually freeze drilling activities.
“The junior market is very dead,” Mr. McGuire said in an interview on Tuesday, adding that most drilling proposals for the 2013 calendar year are coming from senior miners, intermediaries and some very well-funded juniors.
Drilling companies closely shadow price cycles for resource commodities, so it’s no surprise their fortunes have slipped in recent months amid a slowdown in demand for key industrial metals, such as copper and zinc, especially from China.
Moncton, N.B.-based Major Drilling said this week that profit fell 30 per cent in the fiscal second quarter, which ended Oct. 31, and pointed at falling demand from junior miners. The company also suffered as projects were cancelled in Australia owing to high costs, a high Australian dollar and new mining taxes, and in Argentina and Mongolia, where political uncertainty was a factor.
In Argentina, demand for drilling services was late restarting after the southern hemisphere winter and has only reached about 66 per cent of what it was last year, the company said.
Demand will remain low in the current quarter, Mr. McGuire said, as companies are more conservative with their cash and take December off for Christmas, but will come back in the fiscal fourth quarter.
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