Resources Credit crunch and falling prices pull the plug on mineral exploration - for now
Looks like care and maintenance are the order of the future.
New brunswick business journal October 21st
Drilling for lead, zinc, gold and even the exotic metals previously prized in Asian markets has slowed in New Brunswick as funding for projects now deemed less profitable dries up.
This comes as a global credit crunch continues to spook investors and commodity prices keep falling.
"The party's over," said Scott Walters, managing partner and founder of Max Capital Markets Ltd., a Toronto-based investment dealer that has secured financing from institutional clients for more than 60 mining projects in Canada.
"I think the exploration financing market is going to remain very weak for years to come," Walters said.
His firm won't go near greenfield projects - those that have not yet proven resources or begun commercial operation - and his clients "won't even pick up a phone call about an exploration story," Walters said.
"If you're just drilling, looking for a resource, go home."
Junior mining companies looking to cash in on the province's riches have already begun heeding Walters' advice.
Stratabound Minerals Corp. (TSX.V:SB), a Calgary-based company which was actively drilling at two northern New Brunswick sites until just a few weeks ago, has halted its work on both projects, president and director Stan Stricker said.
The company has high hopes for base metals deposits at its Captain copper-cobalt project in the Bathurst mining camp, about 50 kilometres west of Bathurst, and gold at its Elmtree property 20 kilometres west of the city.
"We're taking this opportunity to do paperwork and reports and filing and things like that, that are relatively lost-cost items," Stricker said.
One junior mining project already in commercial production is not faring well.
Blue Note Mining Inc. (TSX:BN) announced the Nov. 28 idling of its two zinc and lead mines west of Bathurst on Friday in response to low commodity prices.
Geodex Minerals Ltd. (TSX.V:GXM) has been drilling for tungsten, molybdenum and copper at its Sisson brook location northwest of Stanley and reported last November that the deposit has a preliminary estimate of 167 million tonnes of molybdenum, tungsten and copper.
Further drilling at that time revealed that the deposit could contain as much as 290 million tonnes.
The Sisson Brook property was at that time estimated at $6 billion or more.
Geodex's stock closed up 25 per cent on Monday to 12.5 cents per share. That's down significantly from their 52-week high set in October, 2007 of $1.37 per share.
Miramichi-based junior mining company Slam Exploration Ltd. (TSX.V:SXL), which has found massive amounts of zinc sulphides at its Nash Creek property in northern New Brunswick, and samples of copper, lead, zinc, cobalt, silver and gold in its True South of the Narrow property in the Bathurst mining camp, has re-focused its projects.
President and CEO Mike Taylor said Slam will continue drilling in the Bathurst mining camp and will work hard on a gold project in northwestern Ontario.
But his company will curb spending overall, just as its stocks have been hit hard. Shares for Slam were down 33.33 per cent, closing at three cents a share. That's significantly lower than their 52-week high of 26.5 cents a share, set in November, 2007.
"We'll be cutting back on our programs as well for the next year. We'll be working on a reduced budget for sure," Taylor said.
Gold exploration projects may not benefit from the market shelter associated with the prized commodity, Walters said.
"I love gold, but gold is being sold right now because people want cash. It's a very liquid market," Walters said, explaining the metal's volatility in recent weeks.
Fickle investors still won't hand their purse strings for the hotter commodity to mining companies with uncertainty on the market.
Stricker said his company has seen crises on the markets before.
"This is at least the fifth big market swing that I've seen since Stratabound went public in '87 and you know, every time it happens it seems like the worst time ever, and maybe this time it is," Stricker said.
"But we'll see recoveries. The world cannot survive long without copper, lead, and zinc."
