Discoveries, joint ventures, expected to revive B.C. mining investment – by Gordon Hamilton (Vancouver Sun – April 29, 2013)

http://www.vancouversun.com/index.html

Industry sees positive signs despite downturn in grassroots exploration

The mining industry faced a significant increase in exploration costs in 2012, particularly machinery and construction materials, said Marianne Carroll, manager of PwC’s mining practice, resulting in net income of $1.8 billion, down from $3.7 billion in 2011.

Despite record expenditures in mineral exploration in British Columbia last year, almost no new exploration took place by junior companies, a trend that is not sustainable, the president of the Association for Mineral Exploration said Tuesday.

Gavin Dirom told a PwC conference on the state of the mining industry that only one to two per cent of the $680 million spent on mineral exploration in 2012 was for grassroots or greenfield projects. The rest of the money went to mature or advanced-stage mining projects owned by major companies.

“That’s not a sustainable formula. Usually, eight to 10 per cent, even pushing 20 per cent, is where we need to go in terms of having sustainability in this sector and having new projects feeding in,” Dirom said.

Despite the drought in exploration investment — the result of the eurozone crisis and falling commodity prices — Dirom said 2013 is shaping up to be a positive year, if not a record year, for exploration.

Mining brought in $9.2 billion in gross revenues in 2012, down seven per cent from 2011, when revenues hit $9.9 billion. Lower prices for coal and copper were the main reason revenues fell, according to PwC.

Further, the industry faced a significant increase in exploration costs, particularly machinery and construction materials, said Marianne Carroll, manager of PwC’s mining practice, resulting in net income of $1.8 billion, down from $3.7 billion in 2011.

Profits were trimmed, but PwC described 2012 as “another thriving year” for the industry as a whole.

And despite the downturn in grassroots exploration — the bread-and-butter of the province’s junior sector — Dirom said recent discoveries and innovative investment strategies are shining a ray of sunshine on an otherwise gloomy investment outlook.

He singled out two examples:

• An April 4 joint-venture agreement between junior Fjordland Explorations and a subsidiary of Sumimoto Metal Mining, a major Japanese mining company, on the Dillard copper-gold project between Princeton and Merritt. Sumimoto agreed to spend $3.5 million in exploration costs over the next three years in exchange for a 51-per-cent interest.

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