Miners Anticipate Wave of Explorer Bankruptcies

Source:

". . .many in the mining industry expect a large number of bankruptcies with some believing that more than half the exploration companies will be forced out of business."

The annual Fraser Institute survey released Thursday found many in the mining industry expect a large number of bankruptcies with some believing that more than half the exploration companies will be forced out of business.

More than half the respondents believe that exploration and development activities of junior explorers will decline "a great deal," while nearly 85% say the activities of production companies will be curtailed.

Nevertheless, more than 70% of miners believe that commodity prices will resume an upward trend as the economy recovers, a quarter believe prices will be stable, and less than 5% of miners believe the downward trend in prices will continue over the long term. "In other words, despite past history, miners believe that the current drop in commodity prices is the exception—increasing prices will be the rule."

The Fraser Institute noted, "Overall, our respondents indicated that they spent US$3.4 billion on investment in 2008 compared with US$3.02 billion in 2007. Finally, it remains true that 'all that glitters is gold.' We asked which mineral represents the greatest proportion of each company's budget: 38.71% of those responding to this question indicated it was gold. No other metal came close."

The highest scorer on the Fraser Institute's policy potential index (PPI)-which measures the overall policy attractiveness of 71 jurisdictions in the survey-was Quebec, which also topped the list in both 2007 and 2008. Wyoming experienced a dramatic improvement, leaping from 22hd place to the number two spot this year, while Nevada ranked third on the list.

Seven Canadian provinces remain in the top 10: Quebec (1), Alberta (4), Newfoundland and Labrador (5), New Brunswick (6), Manitoba (8), Saskatchewan (9), and Ontario (10).

The bottom 10 rankings are Venezuela, Ecuador, Guatemala, Honduras, India, Bolivia, Zimbabwe, Kyrgyzstan, the Democratic Republic of the Congo, and Indonesia.

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