Exploration spending shifting to base metals

Most of Canada’s major mining companies will spend less on exploration this year as part of an industry-wide decline in the search for new deposits. And with the price of gold resting comfortably at US$360, compared with an average of US$383 in 1990, a larger portion of the available funds are earmarked for base metal plays.

According to a recent survey by The Northern Miner, four major gold producers, including Placer Dome (TSE), LAC Minerals, Corona and Echo Bay Mines are all cutting back on exploration to varying degrees. (For the purposes of this story, “exploration” refers to all work outside the vicinity of an established mine site.) Among the big base metal producers, Noranda (TSE) plans to spend $140 million looking for new deposits, about the same amount as last year, but Inco has slashed its budget by about 15% to $42.6 million.

Going against the grain is Vancouver-based Teck (TSE), which has added about 10 people to its geological staff and $4 million to its budget. In 1991, the company expects to spend $16 million searching for new metal mines. The budget will be divided equally among Eastern Canada, Western Canada and the U.S./Mexico, with $6 million set aside for new projects.

“We’re bullish for the 1990s,” said Wayne Spilsbury, Teck’s vice-president of exploration. He stressed that grassroots exploration is an integral part of Teck’s plan for continued growth over the next decade.

Supporting this concept is Rio Algom (TSE), which has budgeted $20 million for 1991 exploration, an increase of $5 million over last year’s expenditures. Two-thirds of the budget will be spent on base metal projects, about 25% on gold and 5-10% on uranium.

For Rio, which has always shied away from precious metal mining, continued emphasis on base metals comes as no surprise. But for companies like Teck and Placer Dome, which evolved into major gold producers during the 1980s, increased spending on base metal prospects is a reaction to slumping prices for their primary product — gold.

“We’ve decreased our emphasis on gold for sure,” Spilsbury told The Northern Miner. This year, Teck will spend 50% of its budget looking for gold, while the remaining half will be spent on base metal and industrial mineral exploration. Blue-chip gold miner Placer Dome will devote at least 40% of its budget to the search for copper, zinc, nickel and other minerals in 1991, an obvious change of strategy.

Where will the majors be spending there exploration dollars? Despite concern that a growing number of Canadian companies are looking to the Southern Hemisphere for future mines, North America remains the exploration hotspot in terms of spending. With the exception of Placer Dome and LAC Minerals, which continue to increase their exposure to South America, Africa and the South Pacific, most of the majors surveyed are doing little more than testing the waters in off-shore countries. Company Exploration Budget ($000’s) 1991 1990 Noranda 140,000 140,000 Placer Dome 65,000 78,900 Inco 42,600 49,600 Rio Algom 20,000 15,000 Teck 16,000 12,000 LAC Minerals 14,000 23,000 Corona 8,000 20,000 Echo Bay 5,000 8,000