NWT - After a year in which exploration companies working in the NWT and Nunavut drastically cut back their expenditures, spending by mineral exploration companies will increase by 39 per cent this year, according to preliminary estimates released yesterday by Natural Resources Canada.

A drill operates on the ice at the site of Avalon Rare Metals' Nechalacho rare earths exploration project located 100 km southeast of Yellowknife. Mineral exploration spending is forecast to increase in both the NWT and Nunavut this year, but spending in the NWT will still trail that of previous years, according to preliminary estimates from Natural Resources Canada. - Guy Quenneville/NNSL photo

But the president of the NWT and Nunavut Chamber of Mines says the numbers still point to a driving wedge between potential mineral investors and the NWT, where spending will remain considerably low compared to previous years.

Mineral exploration in the NWT and Nunavut is expected to total $304.6 million this year, compared to $218.5 million in 2009.

Like last year, the vast majority of this year's spending, $238.3 million, is expected to take place in Nunavut, up from $189 million last year.

In the NWT, exploration spending is expected to total $66.3 million, a sizable increase over last year, when spending plummeted to $29.5 million, causing a ripple effect among industries that cater to the exploration sector. Charters and scheduled cargo and passenger flights for Canadian North were down by 25 to 30 per cent last summer, for example.

But this year's estimate for the NWT still pales in comparison to 2007 and 2008, when $193.8 million and $147.8 million was spent by companies.

"I'm pleased to see the increase in the NWT," said John Kearney, president of Canadian Zinc and the NWT & Nunavut Chamber of Mines. "But – there's a big 'but' – the decline from 2008 to 2009 was 80 per cent."

While a 125 per cent increase over last year is a move in the right direction, "it' still a long way short of what it should be," said Kearney.

"I don't think (the spending) is up to even 2007. What it tells me is there's a major discrepancy between NWT and Nunavut and it's even getting wider."

The estimates show the NWT and Nunavut will account for three per cent and 11 per cent of overall exploration spending across Canada this year, respectively.

"When you think about it, there's (almost) four times more money being spent in Nunavut than there is in the NWT," said Kearney. "I think a lot of that is due to land access issues and regulatory permitting issues. There's still a measure of difficulty in obtaining timely permits in the NWT and that is dissuading juniors particularly from exploring.

"At the moment, the regulatory regime in Nunavut is more attractive than that in the NWT."

Chuck Strahl, minister of Indian and Norther Affairs, told members of the NWT Chamber of Commerce last month that the federal government will begin issuing a series of responses to the McCrank report this spring.

The report, written by Neil McCrank, former chairman of the Alberta Energy and Utilities Board, was released in the summer of 2008 and recommended measures for improving the NWT's regulatory regime.

In Wednesday's Speech from the Throne, Prime Minister Stephen Harper said, "Our Government will reform the northern regulatory regime to ensure that the region’s resource potential can be developed where commercially viable while ensuring a better process for protecting our environment."

The statistics released yesterday generally fell in line with the predictions of some industry participants and observers.

"Most people have bigger programs planned for 2010 than they had done in 2009," Martin McFarlane, president of the Canadian division of MMG Resources, recently told News/North.

The company is developing the Izok Lake and High Lake base metals exploration projects near Kugluktuk.

"I expect generally they'll be a pretty big uplift in exploration and project development," said McFarlane. Kearney previously echoed the same thoughts.

"I haven't got actual numbers for you, but I do expect to see a much higher level of activity in 2010," he said.