ICYMI: Doom and Gloom: Is the NWT’s Resource Sector Tanking?

Ekati’s Jay Pipe may extend the mine’s life past 2019. Aaaaand that’s the end of the good news

The Conference Board of Canada has definitely dropped Tyhee and Fortune mine projects from its latest northern economic outlook, with Avalon Rare Metals’ Nechalacho project and North American Tungsten’s Mactung proposal also looking to be cut. EDGE previewed the NWT resource sector’s gloomy outlook back on June 24:

If you only looked at the GNWT’s Economic Outlook 2014-15 document, you could be forgiven for thinking the NWT Mining industry is on a reasonably stable footing. Sure “mineral exploration expenditures are expected to continue to decline in 2014, to $72 million.” But there will be a “resurgence of metal mining” with “as many as five new mines have the potential to enter production by the end of the decade,” according to the Conference Board of Canada, as quoted in the document.

A presentation yesterday at City Hall by mining industry insider David Connelly (a consultant with Terra X Minerals and Avalon Rare Metals among others) painted a very different picture of the NWT’s mining prospects.

According to Connelly – who was speaking to city council about developing a comprehensive land use plan for the land around Yellowknife before the GNWT’s new cabin leasing framework comes into effect – seven of the eight proposed mining projects in the NWT have seriously stalled. This effectively means the 2013 metal mining forecast, which predicted $539 million would be added to the NWT’s GDP between 2016 and 2018, has been reduced to zero.

Whole lotta nothin’ going on: a slide from Connelly’s presentation

Tom Hoefer, executive director of the NWT and Nunavut Chamber of Mines, confirmed that most of these projects aren’t likely to be contributing to our economy any time soon. EDGE asked him to comment on the future of the upcoming projects Connelly mentioned, and his response was, well, pretty bleak:

  • Ekati – Jay (diamonds): Perhaps the single largest contributor to our economy is Ekati mine, with its 1,400 workers. The Jay project would add 11 years to the mine life and thus sustain our economy tremendously. But it needs to get through the approval and permitting processes to get there.
  • Seabridge (gold): Is focusing its efforts and money on its KSM mining project in BC rather than the NWT.
  • NICO (gold, cobalt, bismuth): The mine has all of its approval to build a mine, but needs the GNWT to first build a highway to Whati, and then Fortune will build a spur road from the future mine site to that highway in order to get its product to market. Until that happens, they have focused investment in a US mine.
  • Prairie Creek (base metals, silver): This project received all of its approvals to build a mine, but in this challenging financial time, wasn’t able to raise sufficient money. It now is proposing an all-weather road to its future mine site, and is seeking environmental approval for that. It still also needs to raise the money it needs to build the project.
  • Tyhee Gold Project (gold): This company halted its Environmental Assessment because of financial challenges. I’m not sure that the stock is trading any longer.
  • Pine Point (base metals): In receivership. This project had its approvals to proceed but couldn’t raise the money it needed.
  • Nechalacho (rare earths): This project is nearly fully approved and is now challenged to find the money it needs to build the $1.5 billion mine. As it does that, it is focusing exploration and development efforts in Nova Scotia.

According to Connelly, in the unlikely event that global mineral markets improve and investors can be found, it would still take at least three years to bring even the most promising project, Prairie Creek, into production. Add to this the fact that the Cantung Mine recently received a court ordered protection from creditors (one step before bankruptcy) and you’re looking at a pretty grim picture (According to the mine’s assistant manager they’ve stopped mining operations, though they’re still processing stockpiles in the mill).

But the Diamond mines! Well, the $859 million Gahcho Kue project is expected to come online in 2016, with a 12-year life span. But as Connelly points out: “Diavik employs 1,000 workers. Gahcho Kue employing 400, won’t offset Diavik’s closure in 8 years.” And unless the Jay Project starts up at Ekati, that operation, employing 1400 people, will close in 2019.

“What the stats show us is that the NWT has not paralleled the great investment that NU and Yukon (and other jurisdictions saw too) witnessed over the past 7 years. In fact, investment in the NWT has languished over that period and we have lost millions of dollars in investment,” says Hoefer. He claims that the territory has “scared investors away. Unsettled land claims and regulatory complexity have contributed. This also delays the exploration process. Stats also show that about 1 in 1,000 exploration projects becomes a mine and it takes from 10-20 years. So if the exploration ‘conveyor belt’ dries up, it doesn’t bode well for future success.”

What’s the effect on Yellowknife?

Opinions vary greatly on how much Yellowknife’s economy relies on mining across the territory and how much a major slowdown in the industry would affect the city.

As Connelly explains: “People always use stats for different things, I could look at the stats and probably come up with the statement that mining, so not including development in mineral resources and the service industry, is 16-27 percent of the economy. I could then say, let’s expand mining to include the development and the exploration, and expand it to include the direct jobs, the indirect jobs and the induced jobs, including all the regulatory stuff… a significant percent of the GNWT, bankers, shoppers, all that stuff, and I could probably get it up over 50 percent.”

Whether or not his assessment of the statistics are correct, there are other, more visible ways in which a mining slowdown is affecting in the city, he says. He spent a significant amount of time calling around to different companies in town that support the mining industry and claims to have found that “local businesses serving the exploration sector have seen business fall 80%-97%.” The number of helicopters operating out of Yellowknife dropped from 60 in 2010 to seven today, he claims. And between 2010 and 2014, annual flights to and from camps dropped from 2500 to 140, annual fuel drums shipped dropped from 14,000 to 400, and camps serviced dropped from 25 to five.

More from Connelly’s presentation

It has to be noted, that Connelly’s numbers were presented within the context of pushing for more mining near Yellowknife, so perhaps the doom and gloom was inflated to make his client’s projects more attractive. But even if his numbers are half-correct, it still presents a stark picture of the city and the territory’s future, unless new projects come online soon, or the economy goes through some serious diversification.


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