Canada's north experiencing reignited mining production, exploration

The Conference Board of Canada has found a turnaround in the U.S. and global economic growth has reignited interest in diamonds, precious metals and other hardrock mining in Canada's three territories.

http://www.mineweb.co.za/mineweb/view/mineweb/en/page72068?oid=109702&sn=Detail&pid=102055

Author: Dorothy Kosich
Posted: Friday , 13 Aug 2010

RENO, NV -

Diamond, gold, zinc and silver mining and exploration means Canada's three territories are expected to post strong economic growth this year.

In their economic forecast and territorial outlook for this year, the Conference Board of Canada found the Yukon was one of the few bright spots in North America last year, as it lead all provinces and territories with economic growth of 1.4%.

The study expects the Northwest Territories to benefit from a surge in diamond mining production-its most important commodity-as consumers have begun to buy diamonds again.

Nunavut's real GDP is expected to expand by 12.9% this year, up from a decline of 10.6% in 2009. This year a rejuvenated mining industry and a recovery in construction activity will drive growth, according to the report.

The sharp fall in metal and minerals prices that occurred in 2008 "had a devastating impact on mining production and exploration across Canada," the Conference Board observed. Nunavut suffered a 10.6% decline in economic activity last year, due to dwindling mineral exploration and the wrapping up of construction activity at Agnico-Eagle's new Meadowbank gold mine.

Real GDP in the NWT dropped by 5.9% last year as global demand for diamonds fell sharply during the recession.

"Over the near term, the economic outlook for the territories is much more positive," the study predicted.

"A turnaround in the U.S. and global economic growth has helped diamonds, other minerals, and metals regain their luster, thereby reigniting mineral production and exploration in the North," the Conference Board noted.

"Over the long term, all three territories will need to adapt to the severe fluctuations in real GDP growth caused by the construction and production phases of large resource sector projects," the study advised.

‘Steadily growing demand from developing nations for energy and raw materials will continue to push resource sector prices above inflation. Exploration and mining are thus expected to continue to grow as a share of economic activity in all three territories, boosting profits, wages and territorial government revenues to the forecast horizon," the report said.

NUNAVUT'S GOLDEN OPPORTUNITY

A rejuvenated mining industry is expected to help Canada's newest territory post real GDP growth of 12.9% this year. Mining and exploration and deposit appraisal expenditures are expected to increase to Cdn$238.3 million this year.

"The territory's largely untapped mineral resources provide much opportunity for the economy to expand, and strong population growth translates into a continuous supply of potential workers and a healthy demand for goods and services," the Conference Board observed.

The Meadowbank mine is forecast to produce 300,000 ounces of gold in its first year of operation in 2010. However, the mine is expected to hire only 35% or 166 of its 475-person workforce from Nunavummiut (residents of Nunavut). The rest will have to be filled by workers from outside of the territory.

"Including mining services, Nunavummiut will make up 54% of those employed in the territory's mining industry this year," the report said. "But this proportion is expected to increase over the forecast horizon as some non-resident workers take up residency and as more training opportunities for the Nunavummiut result in a more skilled workforce."

Meanwhile the report noted that mining in Nunavut faces challenges not seen further south. "For instance, up until very recently, there was a lack of proper geological mapping. Also mineral sites are not accessible by rail or road, and access by air or water requites airport and marine port construction before mines can be developed."

"On top of the already steep price of construction in the North, this pushes site development costs even higher," the Conference Board noted. "Furthermore, transporting the equipment, the workers, and finally the mineral itself to and from markets in the South can deter developers completely."

The study observed that the Agnico-Eagle acquisition of Comaplex Minerals' Meliadine gold project could give the territory another gold mine with production assumed to start in 2016.

DIAMONDS RECOVER LUSTRE IN NWT

Thanks to a rebound in mineral production, GDP in the NWT is expected to expand 4.8% this year and 9.3% in 2011.

"For several years, the N.W.T. has enjoyed higher real GDP per capita than any other jurisdiction in the country," the Conference Board noted. "In fact, at $75,000, the N.W.T.'s output per person in 2009 was more than twice the national average ($35,500).

"The lofty output level is owed to the strength of the territory's mining industry, which directly accounted for 32 percent of all economic activity last year. Resource extraction also generates enormous demand for goods and services provided by other sectors of the economy...But the ride is not always smooth for the mining sector."

Over the last year, prices for rough diamonds have regained "much of their luster," the report observed.

Diavik is the largest of the NWT's three diamond mines and also experienced the largest production cutback last year from 9 million carats to 5.6 million carats. A new underground mine has begun production at Diavik this past spring. A normal production rate of 8 million carats per year is planned.

The territory's newest diamond mine, Snap Lake, is supposed to attain full production of 1.5 million carats annually by the end of 2012, while employing 500 full-time workers.

The sole metal mine in the territory, North American Tungsten's Cantung mine is suppose to restart during the second half of this year.

Mining companies intend to spend C$66.3 million in the territory this year, more than twice what they spent last year.

"Overall, real GDP in the diamond-dependent mining sector is set to rise by 19.3% in 2010 and by another 19.2% in 2011, thanks to stronger market conditions and escalating production at Snap Lake and the Diavik underground operation," the study said.

MINING PROJECTS PROPEL YUKON GROWTH

The Conference Board of Canada predicted real output in the Yukon's mining sector will grow by nearly 60% this year to reach C$115 million.

By the end of this year, the Yukon is expected to have three hardrock mines in operations. The Minto copper-gold mine has been producing since 2007, and will be joined by the Wolverine zinc mine and the Bellekeno silver mine.

"Consequently, metal mining output is projected to nearly double this year," the report forecast.

Natural Resources Canada predicts mining companies will spend $75.8 million this year, with the majority of the spending directed toward precious levels. "In fact, exploration activity could easily exceed that level thanks to renewed interest in the territory's gold resources."

The discovery of significant gold mineralization at the White Gold property recently acquired by Kinross Gold near Dawson City resulted in the filing of more than 8,000 new claims in the vicinity last year.

"The outlook is similarly bright for non-precious metals," the report advised. "Nearly 12 million pounds of copper were produced in the first quarter of 2010 at the Minto site." The copper mine is expected to produce between 50 million and 55 million pounds of copper this year.

To read a copy of the report, go to http://www.conferenceboard.ca/documents.aspx?did=3711