Lockdowns take a toll on junior exploration companies
Planned exploration programs are being drastically scaled back in the wake of COVID-19 precautions.
Companies are limiting work to just essential tasks. Passage between countries and regions can't be guaranteed as border controls become tighter and travel options become more limited. It's also harder to raise funds for exploration. The Oreninc Index, which tracks junior mining finance data, reported on Monday that its index was up but the number of financings have been halved.
Major Drilling said Thursday in a news release that "...activity levels have been impacted in various countries due to government-imposed restrictions and customer decisions."
"At this time, projects are being delayed or deferred. Supply chains and logistics are becoming challenging in certain regions," said the company in a statement.
Major Drilling said it has resources to weather the crisis, but it just drew down a $20 million dollars from its credit facility to ensure access to cash if there is a prolonged slowdown.
With the Government of Quebec closing all non-essential businesses until mid-April, a number of juniors have suspended exploration programs, such as Radisson Mining Resources (TSX-V: RDS) and Probe Metals (TSX-V:PRB). Agnico Eagle (NYSE: AEM), which has already stopped mining in Quebec, said its exploration activities in all of Canada are being suspended.
Some are still able to work. Earlier this week the Ontario government said it was shutting down non-essential service, but mining and exploration escaped the restrictions.
Great Bear Resources, which operates in the Red Lake section of Ontario, said it is carrying on with its $21 million exploration program at its Dixie Project in Ontario. Company president and CEO, Chris Taylor, said the project has other unique circumstances, which allow the project to continue.
"Great Bear does not operate a camp and is benefiting from the logistical advantages of the Dixie project’s location adjacent to the highway just outside of Red Lake Ontario," said Taylor in a news release.
The economic impact from a drawn out COVID-19 lockdown could be significant. According to Natural Resources Canada, spending on mineral exploration and deposit appraisal in Canada alone is estimated at CAN$2.2 billion in 2019.
Joe Mazumdar, analyst and editor at Exploration Insights, said that companies in the middle of drill programs have been just shutting them down. However, he does say the situation isn't that dire. The elevated gold price in 2019 saw money come into the mining sector.
"The difference between 2008 and 2020 is that people have money to do their projects. They've already raised the money, but now they can't actually do the projects. They just can't go forward because of COVID-19," said Mazumdar.