- 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 percent of exploration companies going out of business, according to the Survey released today by the Fraser Institute.
The survey of Mining Companies 2008/2009 also casts a rather worrying opinion that with the majority of the players shelving production, demands for raw materials could be high and thereby raising prices to unprecedented levels.
"Survey responses indicate this year that the mining sector expects dramatically decreased investment and exploration 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 Globalisation Studies.
The survey found that more than four out of five mining executives believe that at least 30 percent of exploration companies will be forced out of business in the current economic downturn.
It further points out that more than 90 percent of respondents believe the exploration and development activities of exploration companies will be curtailed, with 57 percent saying the activity will decline "a great deal."
This comes after years of soaring exploration and development activities, as demand for commodities and their prices rose, said the survey further indicating that almost 70 percent 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," Mr McMahon said.
The Fraser Institute's Survey of Mining Companies said companies participating in the survey reported exploration spending of US$ 3.4 billion in 2008 against $3.02 billion in 2007.
The institute however said despite the overall gloom, industry executives see little change among states in terms of policies that encourage mineral exploration and development.
While most of the highest ranked states with positive policies come from the Canada, the United States and elsewhere in the world, Botswana is Africa's highest ranked country, ranked 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," Mr McMahon said, further adding that the results of the survey are evidence that mining is a fully international business which requires that jurisdictions must be prepared to compete on an international basis to attract mining investment.
"Year after year, the exploration industry tells us that it is reluctant to gamble investing in projects where the policy structure is opaque, unstable, and unpredictable. Jurisdictions that fail to recognize rule of law or respect negotiated contracts and property rights will not be successful at attracting mining investment," he stressed.
The Fraser Institute is an independent research and educational organisation with locations across North America and partnerships in more than 70 countries. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals.
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