Downturn also means bad news for Nunavut’s economy

By JANE GEORGE

How hard is it for small mining and mineral exploration companies in Nunavut these days? The answer is — very hard.

Prosperity Goldfields Corp. drilled in 2011 and 2012 around Kiyuk Lake, west of Arviat, which it touts as the “best new gold discovery in Nunavut.”

Drillers have come up with striking gold grains in the property’s Rusty zone, and this year the company plans to return for more drilling to learn more about how much gold is there.

But then what happens?

It takes a lot of money to go further, said geologist Adrian Fleming, chief executive officer of Prosperity Goldfields, who spoke to Nunatsiaq News during last week’s Nunavut Mining Symposium in Iqaluit.

But, at the same time that the publicly-held company has produced more good results, the price of its shares has dropped as people scramble to get out of gold.

And this has sliced the value of Prosperity Goldfields from 60 cents a share a year ago to 10 cents now.

That is a symptom of the “significant lack of interest in the junior mining companies,” Fleming said, with several developments eroding investor confidence.

These include the poor and unstable economic situation in Europe and the aging of private gold investors, or, as Fleming calls them, “gold bugs”— people with money who like to invest in gold. They’re getting older and becoming more conservative with their investments, Fleming said.

To go beyond drilling, on which Prosperity Goldfields plans to spend $2.5 million in 2013, means spending millions of dollars, now so difficult to raise.

“It is a little bit depressing,” said Fleming, who joked that to develop a gold property, you have to be an optimist, a “glass-half-full” kind of person.

Options include waiting out the dip until, as analyst Patricia Mohr said, there’s a rebound after 2015.

That’s the hope of an investor in Prosperity Goldfields who commented on the Stockhouse Inc. website. The investor had bought shares at a much higher price, but said that “as long as they do not abandon this promising project, in time these prices should have a healthy return.”

TMAC, who recently acquired the Doris North property from Newmont Mining, has some money to spend on that gold project near Cambridge Bay, but its chief executive officer Catherine Farrow also said her company needs to be careful with its money.

TMAC, which is not yet a publicly-held company, is looking for “alternate ways” to raise money through private investors, she said.

“You’ve got to get to 2015,” she said, referring to Mohr’s prediction for a rebound.

Overall, mineral exploration companies will spend less money in 2013 in Nunavut — $312.7 million, a decrease of $130.3 million (29 per cent) from the previous year.

And if you ask, why is all this important for Nunavut? It’s because that dip in the mining industry means much less money for community-based businesses and the territorial economy in general.

Mining, mostly represented by Agnico-Eagle Mining Ltd.’s Meadowbank gold mine, is expected to contribute about 19 per cent to the territory’s gross domestic product in 2013.