Grande Portage Resources Ltd. (GPTRF)

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Strong and Rising Commitments to the Canadian Mining Industry

By Michael J. DesLauriers
16 Apr 2006 at 10:06 PM EDT

TORONTO (ResourceInvestor.com) -- The investment of junior and senior mining companies into prospective ground across all of our provinces and territories continues to increase at a significant clip. The Overview of Trends in Canadian Mineral Exploration published by Natural Resources Canada for the full year 2005 continues to provide insight into where the hot area plays are emerging and illustrate the obvious potential of this resource rich country.

Exploration Spending

According to the latest update in numbers, “In 2005, total expenditures reached $1.3 billion, up 10% from $1.2 billion in 2004, while a further increase of 9% to $1.4 billion is expected for 2006.” It should be pointed out that the 2004 numbers were up nearly 75% over 2003 and that total expenditures have nearly tripled since 2000. Juniors are expected to spend $816 million this year - in 2004 their spending overtook that of the seniors. Despite the massive increases in capital spending, the report points out that the juniors have yet to surpass the levels of 1987 and 1988 when expenditures passed the billion dollar mark (in real terms).

What’s Hot

“In 2005, expenditures for precious metals fell while those for base metals, uranium and the other mineral commodities group rose from 2004 levels. The precious metals group remained first with total expenditures of $524 million, but is expected to decline further in 2006. The base metals group, third in total expenditures behind precious metals and diamonds between 2001 and 2004, surged into second place in 2005 and is expected to keep its ranking in 2006.”

Uranium projects, particularly in Saskatchewan have witnessed a marked increase in expenditures, with 2006 numbers forecast to reach an unprecedented $123 million. Any vigilant market observer would have noticed the demand for uranium stories and with such a serious level of cash being thrown at some prospective historical targets it seems likely that a discovery could emerge sometime this year – of course, which company comes up with the goods is more or less a crapshoot.

Where to Be?

The 2006 estimates over 2005 see junior companies increasing their spending most heavily in Saskatchewan and Quebec, while decreasing outlays in British Columbia. Interestingly, plays in both Quebec and Saskatchewan have been the hottest in the market over the last couple of months. In Saskatchewan, the majority of expenditures are related to uranium and diamonds, while precious and base metals make up the lion’s share of activity in Quebec.

Last year, in an article based on data from the same publication we noted that, “precious metals are the main area of focus for exploration spending, in dollar terms more than twice base metals.”

While precious metals are still the number one target for exploration spending on an absolute basis, the base metals are starting to cut into their share and commitments are escalating rapidly, as the gap has been bridged from twice the dollars being committed to the precious metals a year ago, to a difference of only about 50% projected for this year.

Conclusion

Canada is still a hot spot for mining investment, perhaps all the more so as a result of uncertainty in other jurisdictions as seen in last week’s article about Peru and the general climate in South/Central America. Furthermore, Canada remains mining friendly and willing to provide meaningful incentives for Canadian listed juniors to keep ploughing their capital into the ground at home.

By the numbers, it would appear that with the base metals finally being accepted, the appetite for these projects is on the rise. Uranium is also capturing the imagination of investors as prices continue to rise and underlying fundamentals are strong. That said, with so much money being committed across the country in so many commodities, it is hard to say where the next Canadian discovery will be. One thing seems certain, however, there will be one this year.


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