Mining’s Challenges in the 21st Century

In 1932 when the PDAC was formed, North America was in the grips of a severe and prolonged economic downturn which later became known as the Great Depression. Economic conditions in the early 30s were the culmination of a number of factors, factors made worse as a result of the return to the gold standard by the major countries after a period of fluctuating exchange rates that developed during and following the First World War.

Before the war, exchange rates between the U.S. and the major European countries had remained constant for decades. Gold and capital flows moved freely across borders fostering economic stability and growth. During the First World War European combatants suspended gold convertibility. The U.S., which entered the war late, maintained gold convertibility during and after the war. By maintaining gold convertibility the U.S. allowed the dollar to float against other currencies. Most currencies lost value, some spectacularly so, against the dollar which was a proxy for gold. Anxious to return to price stability, the Europeans returned to the gold standard in the late 1920s.

The subsequent slavish adherence to the gold standard and corresponding lack of liquidity is believed by many economists to have been the root cause for the depth and breadth of the Great Depression. The U.K. abandoned the gold standard in 1931. In 1933 U.S. citizens were prohibited from buying, selling or owning gold. This ban was a prelude to the eventual devaluation of the U.S. dollar with respect to gold by the U.S. Congress, when the official price of gold was increased from US$20.67 to US$35.00 per troy ounce in January 1934.

In the early 1930s the only exploration game in town was prospecting for gold; even at US$20.67 an ounce it was the only thing in the ground that was worth seeking. There were thousands of prospectors in Ontario looking for gold and 75 years ago they decided to join ranks and fight the Ontario government’s proposed legislation that would require all work reports used to keep mining claims in good standing to be signed, for a fee, by a mining engineer. In retrospect, their actions appear prescient, as the 1934 move in the gold price to US$35 per ounce (US$527 per ounce in 2006 dollars) set off an unprecedented gold mining boom. North American gold production more than doubled in the few short years prior to the Second World War. The rest, as they say, is history.

Nearly 75 years later, similar boom times are upon us. Gold prices aren’t quite back to the highs experienced in January 1980 when gold reached a record US$850 an ounce (US$2,081 in 2006 dollars), but most other metals are at record highs, driven by continuing strong demand from Asia, a strong Euro-Zone and a U.S. consumer who continues to spend. Time will tell if this situation is the product of excess liquidity, which is the opposite of the gold standard, but in the meantime we continue to enjoy the ride!

Exploration spending is up. The PDAC estimates that expenditures in Canada reached $1.7 billion in 2006, up from $1.3 billion last year. We are currently in a feverish uranium market. Hedge funds are driving up the uranium spot price which has more than doubled in the last year. The Globe and Mail recently reported that hedge funds and financial investors now account for roughly one-third of uranium spot market purchases. The gold price continues to reassert its role as a currency hedge against the softening U.S. dollar and most other metals are at highs that would have only been dreamt of a few years ago.

High commodity prices continue to impact favourably on exploration budgets while also fuelling the consolidation trend amongst the major mining companies. At last junior companies with good management and prospects can raise funds on the basis of well-positioned properties and encouraging exploration results. We are a long way from the speculative boom of the mid-1990s, Today’s junior mining industry is more mindful of its integrity and is well positioned to take advantage of what we all hope will be a prolonged cycle of strong commodity prices and supportive capital markets.

On that note, let’s take a look at this year’s PDAC convention program.

The first session, on the afternoon of Sunday, March 4, 2007, will feature the outlook for commodities and markets. Several speakers will share their opinions on future metal price trends and developments.

Immediately after the official opening ceremonies on the morning of Monday, March 5, the Keynote Session will delve into Mining’s Challenges in the 21st Century. Topics will include the current mining investment cycle as well as successful strategies and best practices in developing countries. The dynamics of mergers and acquisitions and their impact on the junior mining industry will be of particular interest to those active in that sector. Of interest to all attendees will be a discussion on how our industry will source and direct the human capital necessary to find the mineral deposits which are needed by the mining industry.

Three parallel sessions on the Monday afternoon will appeal to explorationists — on diamonds, the exploration tool box and the African copperbelt. The diamond session, always well attended, will provide a current global snapshot of this branch of our industry. The Exploration Tool Box session will appeal to the practising exploration geologist. The African Copperbelt session offers a fresh look at an old camp with exciting new opportunities.

On Tuesday, March 6, the PDAC will showcase aboriginal participation in the mineral industry. This morning session will highlight some experiences and success stories in the U.S. and Australia, as well as in Canada. A parallel session on the New Archean is the result of new investigative techniques and interpretations that have radically changed our understanding of the evolution of Archean cratons. Part one of this session will provide an overview of the Archean worldwide and discuss the Archean in eastern Canada with particular attention to mineralization controls. In the afternoon, part two will look at other similarly well-endowed Archean cratons in South Africa, Australia and Europe.

Geophysicists with a low tolerance for geological models can seek refuge in the Tuesday afternoon geophysics session. Presenters will discuss leading edge systems and algorithms that will keep exploration geologists and drilling companies busy for generations.

The new discoveries and developments session takes place on the morning of Wednesday, March 7, as does the finance discussion which will look at mining equity market trends and identify potential sources of capital for the junior exploration industry.

Complementing the technical sessions is an open session which provides an opportunity for speakers to present papers on current and topical subjects all day on the Tuesday and on Wednesday morning. See page B16 of this supplement for the complete schedule of presentations. Mineral industry professionals, mining analysts and investors will also appreciate the expanded Core Shack displays which present core and technical information from 46 deposits from around the globe. The Core Shack offers 23 booths in two sessions, session A on Sunday and Monday and session B on Tuesday and Wednesday. Delegates interested in a specific core shack exhibitor should confirm the exhibitor’s session allocation.

This year seven short courses and workshops are being offered at the convention. It is worth noting that the Association of Professional Geoscientists of Ontario (APGO) supports participation by its members in these courses as acceptable continuing professional development acitivites.

The convention planning committee has worked hard and done an outstanding job in producing a program that befits the PDAC’s 75th Anniversary. The program will cover specific commodities; social, regulatory and cultural issues; mineral resource benefits at both the local and national level; and new projects and technological innovations. In four short days delegates will
be brought up-to-date on what’s happening in the world of mineral exploration and development.

We would like to thank all of our sponsors for their generous and loyal support of this year’s convention. Special thanks go to our Diamond Sponsor, Teck Cominco. A full list of sponsors is available on our website at www.pdac.ca.

PDAC 2007 will celebrate the PDAC’s 75th year of mineral industry advocacy. This convention is shaping up to be the largest yet in terms of the number of companies and individual delegates attending. It is truly the world’s largest and most comprehensive mineral industry convention and one that you cannot afford to miss. We offer a once a year opportunity to network with representatives from all over the world in a city that has much to offer. Mark your calendars and plan to be in Toronto to celebrate the PDAC’s 75th Anniversary at the PDAC 2007 International Convention, Trade Show and Investors Exchange on March 4-7, 2007.

I look forward to seeing you there.