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Exploration spending may plummet
Chamber of Mines is skeptical about how numbers are tabulated

Jessica Davey-Quantick
Northern News Services
Wednesday, December 14, 2016

SOMBA K'E/YELLOWKNIFE
The shine may be coming off the boom, but there is still debate about whether exploration spending in 2017 will be a bust.

Natural Resources Canada's latest report on mineral exploration spending projects a 47-per-cent drop in mineral exploration and deposit appraisal for 2016 in the NWT. The federal report states spending intentions for 2016 will have gone from $100.9 million in 2015 to $53 million in 2016. The final numbers are expected to be released in February or March.

NWT & Nunavut Chamber of Mines president Gary Vivian says the projections aren't necessarily a reason to panic.

"I don't think exploration actually dropped in the NWT between 2015 and 2016. The numbers in 2016 probably more truly represent what exploration dollars have been spent in the NWT over the last couple years," he said.

The projections lump both exploration and mine appraisal together.

Vivian said the inclusion of De Beers' Gahcho Kue diamond mine in the appraisal has been artificially inflating these numbers for the last few years.

"I would just about guarantee that's the biggest difference," he said, adding the $53-million figure is a "pittance."

Vivian said he believes exploration spending in the territory should be about three to four times that number.

"We have probably some of the best mineral potential in Canada, in the world. The problem is it's all held up under either land claims or interim withdrawals," he said.

This report comes on the heels of Dominion Diamond's decision to relocate its head office - and 100 jobs - to Calgary, and Rio Tinto's announcement last week that 51 people employed at Diavik Mine will lose their jobs.

Minister of Industry, Tourism and Investment Wally Schumann said these numbers don't indicate a downturn.

"It's something we've got to keep an eye on. I think it's cyclical. The price of diamonds is down, the dollar is down," he said, speaking in the wake of the Rio Tinto announcement.

"I wouldn't say bleak, but there's definitely some pressure on the commodities market, which is going to put pressures on these people that are mining in the Northwest Territories, particularly diamonds."

The price of diamonds has fallen by about 20 per cent over the last two years. The loonie fell to its lowest point in 18 months the day after the election of Donald Trump as United States president, and has continued to slide. At press time, the Canadian dollar hovered between 74 and 75 cents.

Scotiabank forecasts the loonie could fall to 71 cents in 2017, before rising back up to 74 cents just in time for 2018. CIBC has offered similar projections. The majority of the exploration spending in the NWT in 2016 is expected by Natural Resources Canada to have been for diamonds. Seventy-three per cent of the spending is projected to be on grassroots exploration, with the rest on deposit appraisal. Nunavut and the Yukon are also projected by the federal government to see spending on exploration fall, by 43 per cent in Nunavut and 10 per cent in the Yukon. Across Canada, spending is projected to fall 20 per cent.

Schumann says infrastructure investment could help the NWT economy ride downturns in the commodities market.

"Our role as government is to find ways to increase or enhance business opportunities in the Northwest Territories," said Schumann. "One of the things that we're doing is to get federal infrastructure engagement in the Northwest Territories and bring money north so we can develop some of these infrastructure projects that would help mitigate some of these types of negative impacts on businesses."

He cited proposed projects like the Whati all-weather road and Mackenzie Valley Highway as examples.

"All that stuff helps build infrastructure and lower costs for businesses," he said.

Richard Morland, president of the NWT Chamber of Commerce, agrees.

"I don't think that governments can react to every nuance of the market every time something happens," he said.

Vivian isn't so quick to agree however.

"We need to look at this with eyes wide open here. What are the reasons that Dominion moved to Calgary? What are the reasons that Diavik laid 51 people off? It comes down to costs. And the GNWT can't answer all of the questions."

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