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Gloomy outlook for global mining industry with at least 30 per cent of exploration companies expected to shut down

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Release Date: February 26, 2009

TORONTO, ON-The global economic slowdown has cast a pall over the mining industry with the vast majority of mining executives saying they expect a severe pull back in exploration activity and at least 30 per cent of exploration companies going out of business, according to the Survey of Mining Companies 2008/2009, released today by independent research organization the Fraser Institute.

"Survey responses indicate this year that the mining sector expects dramatically decreased investment plans along with a large number of companies either reducing activity or going out of business all together," said Fred McMahon, coordinator of the survey and the Institute's Director of Trade and Globalization Studies.

The survey found that more than four out of five mining executives believe that at least 30 per cent of exploration companies will be forced out of business in the current economic downturn. Of that total, two out of five respondents believe 30 per cent of the world's exploration companies will be forced out of business, with another two out of five stating that 50 per cent or more of exploration companies will be forced out of business.

More than 90 per cent of respondents believe the exploration and development activities of exploration companies will be curtailed, with 57 per cent saying the activity will decline "a great deal." Nearly 85 per cent of respondents say that the activities of production companies will be curtailed, though only 31 per cent believe that the activity of production companies will decline a great deal. This comes after years of soaring exploration and development activities, as demand for commodities and their prices rose. Almost 70 per cent of survey respondents indicated that they had increased exploration and development activity over the past five years.

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

The Fraser Institute's Survey of Mining Companies: 2008/2009 represents the opinions of 658 mining executives and managers worldwide on the policy and mineral endowment of 71 jurisdictions on all continents except Antarctica. Companies participating in the survey reported exploration spending of US$3.4 billion in 2008 and of US$3.02 billion in 2007.

Despite the overall gloom, industry executives give many of Canada's provinces top marks for policies that encourage mineral exploration and development.

For the second year in a row, Quebec is ranked number one overall in the annual survey. Wyoming earns the number two spot, moving up from number eight spot last year, with perennial favourite Nevada dropping one spot to number three. Alberta is the second highest ranked Canadian province at number four overall.

The Canadian picture

Overall, seven Canadian provinces were ranked among the top 10 best jurisdictions in the world for mining policy: Quebec (1st overall), Alberta (4th overall), Newfoundland & Labrador (5th overall), New Brunswick (6th overall), Manitoba (8th overall), Saskatchewan (9th overall), and Ontario (10th overall).

Rankings for other provinces are: Nova Scotia in 12th, Yukon Territory in 15th, British Columbia in 24th, North West Territories in 40th, and Nunavut in 43rd.

"The survey represents the views of the mining industry about individual provinces and territories at a given point in time. While the rankings for some provinces have gone up or down, most of the changes are relatively small and are in line with the year to year variability of a survey," McMahon said.

Significant international developments

Chile joins Wyoming and Nevada as the only other non-Canadian jurisdiction to crack the top 10, ranking in seventh place. Chile is also the highest rated Latin American nation, followed by Mexico in 28th spot and Peru in 30th.

Among Australian states, South Australia has the highest ranking at 16th, followed by the Northern Territories in 20th and Western Australia in 21st.

Botswana is the highest ranked African nation (18th), followed by Mali and Namibia in 33rd and 34th spots, respectively.

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

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

"Mining is a fully international business and the survey results once again demonstrate that jurisdictions must be prepared to compete on an international basis to attract mining investment. Jurisdictions that fail to recognize rule of law or respect negotiated contracts and property rights will not be successful at attracting mining investment."



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