Mining executives have grim outlook

AROUND 30% of the world’s mining exploration companies are expected to collapse as a result of the global financial crisis, according to the Fraser Institute’s Survey of Mining Companies 2008-09.
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Kristie Batten

The Fraser Institute is a North America-based independent research organisation and has been conducting an annual survey of mining companies across the world since 1997.

More than 80% of the 658 mining executives quizzed believed that at least a third of the world’s exploration companies will be forced out of business during the current economic turmoil.

Around 40% of respondents believed more than half of exploration companies will collapse in the next year.

“Survey responses indicate this year that the mining sector expects dramatically decreased investment and exploration, along with a large number of companies either reducing activity or going out of business all together,” survey coordinator Fred McMahon said.

More than 90% of respondents believe that exploration activity will decline significantly, while nearly 85% said output among producing companies will drop.

“All this is bad news for an economy looking forward to recovery,” McMahon said.

“With large numbers of exploration companies expected to go out of business and a vast majority of companies planning to curtail exploration and development investment in 2009, the world may face a shortage of raw materials and skyrocketing commodity prices as the world economy moves past the recession and into renewed growth.”

More than 70% of miners believed commodity prices will again rise once the economy starts to recover.

The study also examined states and countries and the policies that encourage mineral exploration.

The Canadian province of Quebec topped the list for the second year in a row, with Canadian jurisdictions making up seven spots in the top 10.

The other three spots in the top 10 went to Chile and the American states of Wyoming and Nevada.

“Mining is a fully international business and these results reinforce the idea that jurisdictions must be prepared to compete on an international basis to attract mining investment,” McMahon said.

South Australia was the highest ranking Australian state, coming in at 16th position, with the Northern Territory in 20th and Western Australia was ranked 21st.

Botswana was the highest ranked African nation at 18th position.

Zimbabwe, Kyrgyzstan, Democratic Republic of the Congo and Indonesia were the lowest ranking countries.

“Unfortunately, these are all developing nations which most need the new jobs and the increased prosperity that mining can produce,” McMahon said.

“Year after year, the exploration industry tells us that it is reluctant to gamble investing in projects where the policy structure is opaque, unstable, and unpredictable.

“Jurisdictions that fail to recognise rule of law or respect negotiated contracts and property rights will not be successful at attracting mining investment.”

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