NORTHWEST TERRITORIES / NUNAVUT
Mineral exploration industry spending is forecast to fall about 29 per cent in both the NWT and Nunavut this year amid what is being characterized as a financial crisis in the junior marketplace.
Natural Resources Canada is projecting a spending drop in Nunavut to $312.7 million from preliminary figures of $443 million spent last year, and spending in the NWT of $81 million - down from $114.5 million in 2012.
The estimates in the department's semi-annual report on Exploration and Deposit Appraisal Expenditures include both junior exploration and mine development expenditures, based on a survey of mineral exploration companies.
Given the current market conditions, which are making financing exploration very difficult across the country, industry observers have been expecting a drop in investment, according to the NWT and Nunavut Chamber of Mines.
"We're in a real financial crisis with junior exploration companies and the junior marketplace," said executive director Tom Hoefer, who said there was discussion at length at this year's Prospectors and Developers Association of Canada general meeting about where things are heading.
"Now that doesn't mean that every junior is in trouble but there certainly are a number of them that are," Hoefer said.
Spending intentions have dropped across Canada, he added, with total spending intentions for 2013 projected to decrease to $3.35 billion from $538.4 million in 2012.
A number of companies have managed to weather the junior market financial crisis, Hoefer said.
"There are companies out there that are juniors that are still successfully moving their projects forward."
Sabina Gold and Silver Corp., which recently conducted open houses across the North announcing the success of its 2012 work program at its flagship Back River Gold Project, has seen the stressed market conditions but is still going ahead with its 2013 program in the Kitikmeot region of Nunavut.
"Obviously it's causing us to have a very critical view to everything that we spend but our priority right now is to get Back River up and running and to progress Back River to development and eventually production," said Nicole Hoeller, vice-president of investor relations.
Sabina has budgeted to spend up to $55 million on this years' program, which is to include the completion of the prefeasibility study, environmental and permitting spending, and about 50,000 metres of drilling.
"We're fortunate enough to have a really good treasury and can set that money aside so we could go ahead and do the work we need to do," Hoeller said.
The company ended the year in 2012 with a treasury of $116 million raised in the capital markets, including $50 million from the sale of the Hackett River project to Xstrata.
Sabina can potentially see a major silver royalty from Xstrata's Hackett River Project upwards of $100 million a year.
Proponents of the less-advanced projects across the North are not in similar positions, Hoefer said.
"How I perceive it is those projects that have been quite successful at expanding their mineral deposit size or finding more mineralization over the last few years have developed a pretty good investor loyalty and those investors are with them, they're hanging in there," Hoefer said. "But for the more grassroots kinds of projects, where the risk is even higher because they may not have found anything or it's just such early days that there's even more risk on the project, those are the ones that seem to be having the most difficulty."
At this critical time the focus should be on providing a welcoming investment environment, Hoefer said.
"It's really important that we help these companies exude confidence so that as they go through their processes, their regulatory processes, and all of the work they do to advance those projects, I think it's even more important that we're saying 'The North is open for business and we're welcome to investment and we're glad that the folks that are here have decided to put their money here because it's safe here,'" Hoefer said.
