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Prospectors hardest hit by escalating interest rates.

Prospectors hardest hit by escalating interest rates

Like the rest of the Canadian economy, high interest rates are affecting the mining and mineral exploration industry.

However, the interest rates have different effects on different companies.

And, as with individuals, the rich are better able to survive the economic shock to the system.

Prospectors are being hurt the most by the high rates.

Garry Clark, chairman of the Northwestern Ontario Prospectors Association, said the problem is that money is being attracted by the high rates offered by treasury bills and other guaranteed high-yield investments, instead of by stocks and exploration financing.

"If you slow down the juniors with financing, you slow down the prospectors because they won't have a market for their properties," he explained.

Clark can't specifically say how many projects in the northwest have been affected.

His belief is that interest rates will eventually lessen, but, in the process, some junior companies will be weeded out.

He does not know how long that process will take.

For major player Placer-Dome Inc., high interest rates have not prevented the company from doing any necessary work.

As Henry Brehaut, senior vice-president of Canadian operations, explains it, the company doesn't need to borrow money to carry out any projects.

"We have the money," he said in a telephone interview from Toronto. "Interest rates are not impacting on our activities to a great extent."

To make matters worse for prospectors, the increase in interest rates has coincided with the end of the federal government's Canadian Exploration Incentive Program, which stimulated investment in junior companies by offering tax breaks to investors.

However, many prospectors have taken advantage of the new Ontario Prospectors Assistance Program and Ontario Mineral Incentive Program, said Clark, noting about half of the grants are going to the northwestern area of the province.

"That might be counteracting interest rates for a while, anyway," he said.

Meanwhile, some companies have no choice but to undertake capital projects despite high interest rates.

Inco Limited, for example, has a government directive to clean up its sulphur dioxide emissions.

Peter Garritsen, manager of the sulphur abatement program in Sudbury, said it's hard to say whether the high interest rates are adding to the cost of the $500 million project.

Interest rates may be making some of the equipment needed for the project more expensive, Garritsen speculated. "We can't tell, but I would assume there would be some (extra cost)."

However, he said it would be impossible to actually attach a cost of the higher rates on the sulphur abatement project.
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Title Annotation:Gold Mining Report
Author:Bickford, Paul
Publication:Northern Ontario Business
Date:Jul 1, 1990
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