Prospects Optimistic For The Mining Sector

Service trucks and their operators have long felt the pinch from slumping commodity prices. But is there light at the end of the tunnel?

North America’s oil sector has been hit hard compared with other natural resources, and mining hasn’t fared much better. However, cautious optimism at the 2017 convention of the Prospectors and Developers Association of Canada in Toronto this March suggests hope for better times ahead.

Canada is a haven for miners. Many companies active in the U.S. and abroad maintain head offices in Toronto and Vancouver and list on Canadian stock exchanges because the country is widely viewed as stable and friendly to resource extractors.

Mineral Mountain Resources is a classic example. Based in Vancouver, the exploration firm is actively prospecting for gold in the Black Hills of South Dakota.

“We’re hoping to drill 48 holes in the next six months or so,” corporate development vice-president Brad Baker told Service Truck Magazine while staffing his company’s booth on an expansive trade floor the size of multiple football fields.

Gold price favors prospects

“The next step will be looking at the feasibility and economics going forward,” Baker said. He added that the company anticipates it could produce gold at less than $800 an ounce with all expenses factored in, so with gold trading at more than $1,200 he believes the prospects for profit bode well.

Aware of oil patch woes in neighboring North Dakota and its effect on the service truck sector there, Baker is conscious of the potential impact his company’s own success might have on South Dakota even though the state’s natural resources have also been fairly subdued.

Mineral Mountain uses drill rigs for exploration and has contracted out its operation and maintenance to specialists. However, actual production would necessitate a broad range of heavy equipment regardless of who takes care of what.

“Now that the price of gold has rebounded substantially from its drop the last three years or so, there’s a lot more activity starting up,” Baker said. “We anticipate that to accelerate in the next year or two.”

Gold is one of the bright lights on the mining circuit, and Mineral Mountain isn’t alone. Based in Reno, Nevada, Renaissance Gold is actively exploring properties in that state and neighboring Utah, within a region known as the Great Basin.

“We’re doing preliminary field work, surface sampling, mapping, geophysics and identifying targets for drilling,” president Ron Parratt said, outlining a game plan that typically sees exploration juniors market their finds to larger companies to finance further drilling. Parratt said one large gold producer has invested money for evaluating three properties, and a large financier has agreed to invest in further exploration.

Nevada heating up

Overall, Parratt said, the economy is “not too bad right now. I see things improving, not in leaps and bounds, but we’ve had a couple of new deals in the last month which will be very good for our company this year.”

As with Mineral Mountain, Renaissance Gold contracts out for heavy equipment. “We talk to the people running those companies all the time to find out how they’re doing and what their rig availability is in the event that we need equipment for our projects,” Parratt said. “Earlier this year they were saying they had a high percentage of their equipment committed to be out in the field. It’s not booming, but that’s an improvement over a year ago.”

Nevada is a definite hot spot for mining in the U.S. Vancouver-based Nevada Copper operates a newly permitted, large scale copper mine near the town of Yerington, southeast of Reno. “We’ve advanced the project so there’s significant infrastructure in place underground — hoist, head frame and shaft,” said executive vice-president Bob McKnight. “Right now we’re trying to recapitalize the company and get it ready for actual construction.”

McKnight estimated production two years out and offered some sense of his company’s heavy equipment plans. “For the open-pits we’ll have large-scale haul trucks, drills and all the surface trucks associated with that — lube trucks, all that sort of stuff,” he said, noting “some very large cranes” have already helped erect mining frames.

Alaska another hot spot

Vancouver-based Bravada Gold has a dozen gold and silver exploration projects in Nevada, and president Joe Kizis expressed optimism.

“We’ve just gone through a God-awful period in the downturn in the mining industry,” Kizis said. “Juniors, particularly, were slaughtered because there was no risk money available.”

Tending his booth, Kizis forecast a catch-up period. “Some people would say it’s underway right now; other people are more conservative and say it hasn’t arrived yet but is on its way. My feeling is it can’t be too much farther out. After just terrible years, this year looks like it’s going to be better.”

Kizis said heavy equipment contractors are telling him they’re getting busy. “Drill rigs in Nevada are difficult to get — they’re already pretty much tied up for the main part of the season, though they can squeeze you in for small jobs.”

Alaska ranks second to Nevada as a U.S. gold hot spot, according to Mélanie Hennessey, vice-president of communications with Vancouver-based NovaGold Resources, which has a couple of strong prospects in the state.

“It’s a very healthy business there with eight mining operations currently ongoing with great relationships with the local communities,” Hennessey said.

NovaGold’s Alaska activities include the Donlin Gold Project, a 40 million ounce deposit southwest of Anchorage that’s held with joint venture partner Barrick Gold.

“We’re about a year away from permitting,” Hennessey said, adding that further studies and engineering mean at least five years before the project offers any potential for production. And that’s only if the price of gold justifies the small fortune the two partners would have to spend to establish mine infrastructure and transportation access to ports.

Cobalt moves expected

It’s hard to tell what market conditions will look like in five years. But Hennessey said equipment and service providers have been hurt substantially due to the downturn in the oil sector, and mining might offer some relief.

“I think mining can help, but not to the level of where the economy was, say, five years ago,” she said, adding that equipment and service providers who thrive will be those who bide the downturn wisely and look for ways to innovate.

While not as hot as Alaska or Nevada, Idaho and Montana are also attracting attention. “We’re fully cashed up and about to start operations on nine different projects, to sample them and determine which will be our primary targets,” said Jason Gigliotti, a consultant to Vancouver-based Cruz Cobalt.

Gigliotti said his company foresees cobalt prices climbing multifold, as lithium prices have done in recent years due to high demand from industrial and high-tech sectors. “That (lithium) was almost exclusively predicated on electric car demand and growth almost exclusively out of China. We think cobalt’s about to do the same kind of move.”

Describing Montana as “kind of under-explored” for mining, Gigliotti said any success there stands to diversify the state’s economy. Idaho, on the other hand, is “a very minerally charged state” with considerable activity in gold and cobalt. “It’s a great state to work in, it’s a lot more explored than Montana.”

As commissioner of the Iron Range Resources and Rehabilitation Board, a state economic development agency, Mark Phillips staffed a booth to promote investment in his state’s resource activities. “There’s three iron ranges in Minnesota,” Phillips said, describing strong activity in past decades.

“We’ve had a severe downturn in mining due to unfair steel dumping in the U.S.,” Phillips said, pointing to a drop from 42 million tons of ore produced annually to less than 30 million. “We had more than 1,000 laid off out of 4,500 in direct mining, but it had a very strong impact on the indirects because there are so many vendors up in northern Minnesota that serve the industry, so it was devastating right down the line.”

Iron ore recovering

Still, Phillips said conditions seem to be improving. “At the tail end of the Obama administration they finally got the message and they started endorsing our trade laws, so our taconite — which is our iron ore industry in Minnesota — is just starting to recover.”

This year’s convention came at a propitious time for a sector with a reputation for brash, wild-west craziness, with 2016 providing no shortage of unexpected news, including the election of Donald Trump as U.S. president and the Brexit referendum vote that has the United Kingdom poised to leave the European Union.

“Mr. Trump’s doing a wonderful job,” said Donald Brown, a prospector and geologist based in Ottawa, Ont. “Every time he lies he creates uncertainty, and he lies at least once a day. This means that gold will go up incrementally with time.”

Brown, 82 and a perennial at PDAC, was hoping to persuade investors to purchase properties he holds in northwestern Ontario. “I did some deals five or six years ago but the last few years have been an absolute drought. But I’m hearing that it’s starting to ease up, that the juniors are starting to raise money.”

Saul Chernos is a freelance writer based in Toronto.