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Exploration firm owner blames feds for the industry's slump.

Exploration firm owner blames feds for the industry's slump

The down cycle in the mining exploration industry is not going to follow traditional patterns, says Jim Richard, owner of Infoterra Digital Inc.

"This time is different. There's been a fundamental change in the economy and in the structure of the business," he said.

The change, according to Richard, is that available land is now held by only a few companies.

Even if the government were to offer financial assistance to junior companies, it is too late, said Richard. There would be no land to buy, and there will not be until the large companies weed out what they want and don't want.

Richard holds the federal government responsible for the situation. Until mid-1988 exploration was doing well, even with investors being nervous because of the stock market crash. Then the government terminated the flow-through-share investment incentive program.

The Canadian Exploration Incentive Program, its successor, was strangled in its infancy. The industry had no warning, said Richard.

The end of the flow-through-share program marked a steady decline in exploration dollars. Then began the process of layoffs and cutbacks. Large companies ate up small companies and bidding wars became fierce, reducing prices to levels as low as one-third that of healthier times.

Richard describes these "desperation bids" as a Catch-22 situation.

"They have to bid down to compete, but the companies are saying, `If you can do it for that price, why was it 300-per-cent more before?"

There are only three options open to exploration companies - sell out to larger corporations, branch into a related field or leave the business entirely.

The sad part, Richard said, is that many companies are doing the latter.

"In six or seven years, if and when things turn around for the better and there's a sudden demand for personnel, there's not going to be anybody left," he said.

Not only are they leaving the business, but young people considering their vocational options are avoiding the geological field. If things do pick up, Richard predicted there will only be middle-aged people around to do the field work formerly done by students.

Richard chose the middle option - branching into a related field. He owns Overburden Exploration Services, a company which has been around since 1985. It employed up to 16 people during peak periods, but now it employs only Richard and his wife.

Overburden Exploration provided consulting and field management services, as well as commercial lab processing for the exploration sector. The lab - only one of two like it in Ontario - has been sold to an assaying company.

"Our business was narrowly based in this one, specialized aspect of exploration. There was a lot of work going on and this was in demand," Richard said.

The company conducted drilling programs, coring through glacial overburden looking for traces or indications of mineralization.

The business suited Richard's academic specialization in the field of glacial quaternary. He defines his specialty as "sand and gravel, dirt and clay." And that's what glaciers left in their wake.

Compilation of data for clients meant work on computers. When he started thinking about a change of vocational emphasis, computer application work, Infoterra Digital Inc. was the obvious choice.

When the slump happened a lot of mining and exploration firms were just starting into computerized GIS (Geographical Information Systems). They had already started with AutoCAD or CAD-based programs and data-based management systems, which link information lists with geographically referenced maps.

Since computers were already making inroads into the industry, it was a business with potential. Computer application is not limited to the mineral exploration sector, Richard added.

Much of the Ontario geological survey was funded through the Canada-Ontario Mineral Development Agreement (COMDA). The five-year agreement has expired and hasn't been renewed. As a result, up-to-date geo-scientific information is a must for the exploration industry, he said.

There are other factors hurting the already maimed industry. Government regulations, particularly concerning land use, are affecting mining and exploration.

Governments develop broad policies which industry uses for future planning, he explained. However, when policy starts being "turfed aside in individual little battles, because of pressure brought to bear," there is no longer any security.

"The government has some serious policies to address, because business can't run on such an unstable footing," said Richard.

He is quick to point out that he supports the policy of multiple land use.

The idea of putting up fences around a resource and saying "this is mine," is part of the southern Ontario mentality, according to Richard. Resources have been used up and what remains has been fenced in. Now that attitude is moving northward.

While restrictions tighten here, exploration in other countries, particularly those in South America, looks attractive. Low costs and government incentives, in places like Chile, are much more appealing than the "terrible business climate" in Canada.

Richard advised surviving Canadian exploration companies "to pool their talents for their mutual benefit." 104710098 51640OCT0090MMPT0006

Mines ministers pledge to cut duplication of regulations concerning the environment

The Canadian mining industry is requesting that the provincial and federal mining ministries exercise reasonable judgement in applying tough, new environmental regulations to the industry.

That's the message the Mining Association of Canada (MAC) delivered Aug. 28 to Canada's mines ministers at their 47th-annual conference in Winnipeg, Man.

The ministers concluded their meeting with a communique that pledged efforts to reduce federal/provincial regulatory duplication, which is making it increasingly difficult for Canadian mining companies to operate in today's environment-conscious atmosphere.

"We believe that sustainable mining is an achievable goal," said MAC president George Miller. "That is, a mining industry that provides for the material needs of society and the economic needs of employees, communities and shareholders, while operating in a manner that safeguards the health of the environment," he added.

The ministers' final communique made little mention of the problems facing Canada's junior mining companies. The Prospectors' and Developers' Association of Canada (PDAC) predicted the collapse of the junior exploration sector in 1991 if nothing is done to restore investor confidence.

"If Canada is to maintain its competitive position over the long term, then its junior companies - those companies which play a major role in finding new ore deposists - must be nurtured and nourished," said PDAC president Robert Ginn.

The ministers, while acknowledging the problems facing junior exploration firms, made no promises, nor did they publicly suggest any solutions. The communique was carefully worded to omit even a passing mention of the Canadian Exploration Incentive Program, which was cancelled by Ottawa in 1989.

Timiskaming Tory MP John MacDougall, the chairman of the conference and parliamentary secretary to Energy, Mines and Resources Minister Jake Epp, made it clear to CEIP advocates that the once-popular incentive program is a non-issue as far as the government is concerned.

"We (Ottawa) have comments from those in the exploration community which suggest a satisfactory level of exploration spending would be about $800 million annually," said MacDougall.

MacDougall said exploration activity was overheated in 1986 and 1987 when spending topped $1.3 billion and $1.4 billion. Since that time, MacDougall said the big factors affecting juniors have been the price of metals and the stock market crash of October 1987.

"There are indications that spending this year will be somewhere between $750 million and $850 million," said MacDougall. "It would be awfully difficult for me or anyone else to approach the minister of finance to reverse the decision if the industry expectations are being met."

In the meantime, a government-industry working group is monitoring the junior exploration sector with a specific eye to determining whether investors channel funds to juniors as metal prices improve, despite the absence of the CEIP.
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Title Annotation:Mining Report; Infoterra Digital Inc.; Jim Richard
Author:Smith, Marjie
Publication:Northern Ontario Business
Date:Oct 1, 1990
Previous Article:Timmins Nickel exploration confirms Langmuir ore body.
Next Article:Mines ministers pledge to cut duplication of regulations concerning the environment.

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