ne of the world’s biggest and most successful industries is Canadian
mining. Geological conditions, coupled with a competitive investment
code and political and economic stability, has attracted big international
names such as South Africa’s De Beers, BHP Billiton of Australia
and the UK’s Rio Tinto.
Hundreds of prospectors are staking a claim in Canada’s wilderness,
prompting headlines of a new gold rush. And there is also talk of a
diamond exploration explosion, with Canada becoming a ‘diamond
country’. Alliances are being formed and investment is flowing
in, while new legislation is making it easier to set up in the more
remote regions.
Last year, De Beers spent half its global exploration budget in Canada
and it is looking to spend more. BHP Billiton owns what is at present
Canada’s only producing diamond mine, Ekati, in the Northwest Territories.
Two others are being developed nearby by De Beers and a joint-venture
between Rio Tinto and local firm Aber Diamond Corp. Once all three mines
are in production by 2004, Canada will become the world’s fifth-largest
diamond producer, after South Africa, Botswana, Australia and Russia.
Many
of Canada’s most successful players have taken their expertise
abroad in a bid to expand, although there is immense potential at home.
Local firm Ashton Mining has seen its stock quadruple on the back of
good reports regarding its diamond exploration in Quebec’s Otish
mountains.
Inco, based in Toronto,
is the world’s top producer of nickel, providing about a quarter
of the world’s supply. The company, which is celebrating its 100th
birthday, also mines and processes copper, cobalt and precious metals
such as gold, silver and platinum.
Inco’s primary mining and processing operations are in Canada,
Indonesia, China, Japan, South Korea, Taiwan, the UK, and on the Pacific
island of New Caledonia, where its US$1.4 billion Goro nickel project
will significantly enhance its production figures.
|
Jones
‘Market
for specialty products is less prone to fluctuation’
|
|
|
Company
president Peter Jones is
bullish about long-term prospects despite the uncertainty of the metals
markets. “We are in a cyclical business. We’re mainly producing
a commodity, although we try to differentiate what it is we produce
from the rest,” he says.
The firm aims to be profitable at the bottom of the price cycle and
to make big profits at the top. “We’re getting much closer
to that,” adds Mr Jones.
Last year, Inco posted a profit on the back of healthy nickel prices
and plans to do the same this year. In five years, Mr Jones expects
nickel output of over 600 million pounds a year, against 460 million
pounds for 2001. Expansion is also expected for copper, cobalt and platinum.
Inco has developed a reputation for innovation and know-how. In the
car industry, it works with manufacturers such as Toyota to improve
battery products. Inco is also something of a pioneer in producing nickel
powders and foams for rechargeable batteries.
Mr
Jones would like to double Inco’s earnings from specialty products
to US$400 million over the next few years. “Specialty products
have a market that is less prone to the fluctuations of the normal metals
cycle,” he says.
Vancouver-based Northgate
Exploration, which owns the massive Kemess copper and gold mine,
has formed an alliance with Doublestar Resources and Procon Tunnelling
& Mining to develop the Sustut copper deposit in British Columbia.
It is estimated to contain six million tonnes of copper, as well as
silver, and production could start in mid-2003.
Having been refinanced, Northgate is set to expand drilling at Kemess,
in which it took a 95 per cent stake in 1999. The Kemess North project
has an estimated 5.7 million ounces of gold. Northgate outputs 260,000
ounces of gold and 75 million pounds of copper a year from Kemess South.
The estimated lifespan of that mine is eight years, but fresh drilling
is due to start this summer.
In
the September quarter of 2001, Northgate finalised a US$100 million,
six-year syndicated loan to refinance the one it took out to buy Kemess
from Royal Oak Mines. Northgate chairman Terry Lyons says sweeping changes
were introduced to turn the mine around. “We changed everything.
We cancelled all our supply contracts, which we were allowed to do under
the [Royal Oak] bankruptcy.
“We reorganised our whole approach to maintenance and made some
key suppliers our partners to improve performance. We acquired more
trucks and another loader so we could move more material – we even
changed our caterers. We have raised productivity by about 50 per cent
and revenues by US$20 million by reducing costs.”
That the Kemess mine yields both copper and gold helps to cap costs,
says Mr Lyons. “Recycling copper is very costly and there aren’t
a lot of mines coming onstream. Marginal producers are having to leave
the business. Those with a by-product such as gold can cut their copper
exploitation costs.”