Market instability cools Nunavut's mining developments

The financial meltdown in the United States is poised to slow Nunavut's growing mining industry as beleaguered investors hold their purse strings close and companies have a harder time getting the financing they need.

The territory's mining industry is dominated by junior firms that are exploring for minerals but have not put any mines into full production.

Analysts say that without any real assets, those companies will have an especially hard time raising money for projects costing hundreds of millions of dollars. That, in turn, could mean jobs coming from potential new mines in Nunavut could be years away.

"Any company wanting to raise money here are walking into a wall," Patrick Donnelly, a mining analyst with Salman Partners in Toronto, told CBC News on Wednesday.

"No one's interested in participating in any financing whatsoever."

Toronto-based Starfield Resources, which is developing its Ferguson Lake nickel, copper and cobalt mine near Rankin Inlet, has seen its stock drop from a $1.40 high late last year to 46 cents at the close of trading Wednesday — thanks to cash-starved investors.

"This type of panic selling, mistakes, whatever you want to call it, continues to happen. This limits our ability to raise equity," Starfield president André Douchane said.

Douchane said he believes Wall Street's woes will be over before 2010, when Starfield needs to raise more than $1 billion in financing.

But no one knows for sure when the U.S. markets will recover from the current crisis, Donnelly said.

"That's the magic question. I don't think anyone knows," he said. "I don't think [U.S. President ] George Bush knows."

About $320 million has been spent on mining exploration and mining deposit appraisals this year alone, according to the N.W.T. and Nunavut Chamber of Mines.

"There are billions of dollars worth of known mineral deposits in Nunavut. But knowing about them is a lot different than bringing them into production," said Mike Vaydik, general manager of the chamber of mines.

"Production takes significant investment, and the way that investment is raised is on the stock market," he added. "So we need a stable market."

But Vaydik said people shouldn't panic: the value is there, he said, and the mining industry is known to have its ups and downs.

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