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CANADIAN MINING PERSPECTIVES: Closures reflect falling metals demand

Sliding metals prices are taking their toll on Canadian mines. Over the last week, five companies have announced cl...


Sliding metals prices are taking their toll on Canadian mines. Over the last week, five companies have announced closures or suspensions at copper, nickel, zinc and palladium projects. And the list is likely to grow.

First came news that Montreal’s CAMPBELL RESOURCES is suspending work at its Corner Bay copper project near Chibougamau, Quebec. The project is fully permitted for the extraction of a 40,000-tonne bulk sample, but “the company’s lack of liquidity” has forced it to suspend mining work. Besides a projected lack of demand for copper, the fallout from the world’s financial fiasco is taking its toll. Raising the necessary capital is becoming more expensive. Campbell says it is moving ahead with the environmental permitting process so that the deposit can be mined after the bulk sampling program is eventually completed.

Then BLUE NOTE MINING announced it is placing both its Caribou and Restigouche zinc-lead mines near Bathurst, New Brunswick, on “temporary care and maintenance.” The company has been struggling with high operating costs in recent months, yet despite lowering costs and meeting all production targets, the suspension is necessary. Even a bailout from BREAKWATER RESOURCES, which invested in a 20% equity share of Blue Note, was not enough to keep it going as zinc prices head downward.

Nickel prices, too, are under pressure forcing two suspensions in the Sudbury Basin of Ontario. FIRST NICKEL has place its Lockerby nickel-copper mine on care and maintenance. The company cites “low metal prices and the challenging financial environment.” But it pledges to continue its exploration programs both near Sudbury and in northern Ontario. Likewise FNX MINING has suspended commercial production from the Contact deposit at its Levack nickel mine, but it says mining from other areas of the Levack Complex will continue during the fourth quarter to recover about 30,000 tonnes for later “metallurgical test” production. FNX says it will make a further decision on the fate of mining the Levack Contact deposit at year-end. Meanwhile, the company will reassign its employees to its many other projects in the area rather than lay them off.

Canada’s first primary palladium producer, the Lac des Iles mine north of Thundery Bay, Ontario, will be placed on care and maintenance effective Oct. 29, 2008, says owner NORTH AMERICAN PALLADIUM of Toronto. Three hundred fifty employees will be laid off. Again, “adverse market conditions” particularly falling demand in the automotive industry, were blamed for the decision. The company said, “In 2008, palladium has fallen from a high of $582/oz to $180/oz and platinum has dropped from a high of $2,273/oz to around $880/oz.” Those are steep declines.

Junior miners also face the double whammy of falling commodity prices and rising financing costs. They are particularly vulnerable at this time because they have no cash flow. But without their determined exploration efforts, new resources will be undiscovered when prices rebound. Let us hope the Canadian financial crisis is neither deep nor long.

Analysts are predicting lower metal demand from both China and India in the short-term. Mid-term, they anticipate, prospects are for an uptick in prices and demand. How far demand will rebound and whether it will return to a period of prolonged growth is anyone’s guess.

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