A Vibrant Exploration Industry
Explorers capitalize on favorable commodity prices
Exploration and financing, both in Nevada and globally, had a shaky first half in 2020 due to Covid-19. Though mining was declared an essential industry and was allowed to continue operating, widespread uncertainty, coupled with restrictions to cross country boundaries and difficulties to mobilize exploration teams, caused a slowdown in exploration activity during the first months of the year.
However, the industry soon recovered from the initial shock. Numerous junior companies managed to raise large amounts of capital in 2020, in a context of rising metals prices and improving financing conditions. Gold reached an all-time high in July 2020 trading at US$2,076/oz, silver approached the US$30/oz mark for the first time in eight years, and copper reached an all-time high in May 2021, trading over US$4.75/lb.
In the first half of 2021, Nevada saw multiple IPOs, with Summa Silver (TSXV: SSVR) going public in January, followed by American Eagle Gold (TSXV: AE), Millennial Precious Metals (TSXV:MPM), and Nevada Silver Corporation (TSXV: NSC) in May, and Infield Minerals (TSXV: INFD) and NevGold (TSXV: NAU) in June.
As a result of the huge amounts of capital raised in 2020, 2021 was characterized by an exploration boom. This was evidenced by an increase of US$345.2 million in the US’ mining exploration budget in 2021 compared to the previous year, according to data from Statista. In addition, there was a considerable increase in applications for mineral claims; as of December 1, 2021, there were approximately 235,000 active mining claims on BLM-managed lands in Nevada, representing a 30% increase over the number of active mining claims on BLM-managed lands in Nevada only four years ago.
“We are also seeing evidence of this on the ground, with the lack of drill rigs and experienced personnel and delays in getting assays out of the lab all pointing to a very robust exploration environment,” stated Gary Lewis, group CEO of US-based explorer Nevada Silver Corporation.
David Shaddrick, president of the Nevada Mineral Exploration Coalition, described the current increasing exploration activity as a “multiple commodity boom”. “In addition to gold, there are numerous silver, copper and lithium projects underway as well as zinc, vanadium, fluorspar and other less well-known projects,” he commented.
Nevertheless, the huge amounts of capital that flew into junior companies operating in Nevada in the second half of 2020 and first half of 2021 were not matched in the second half of 2021. The competition to attract capital in the junior mining market has become fierce, making it difficult for companies to stand out from the crowd with so many options for investors. “It is no secret that the small-cap mining market has been challenging over the last several months, with a lot of companies down 50%+ from their summer highs,” explained Colin Moore, president of Vancouver-based Westward Gold (CSE:WG).
In the second half of 2021, precious metal prices trended lower, reflecting declining investor sentiment and soft physical demand. Gold prices have been relatively more resilient and seem to have found a new base level above US$1,700/oz but were weighed down by outflows from gold-backed exchange-traded funds and slowing central bank purchases. Meanwhile, silver prices slumped on waning industrial demand. In 2022, precious metal prices are anticipated to ease, but there continues to be high uncertainty arising from the Omicron variant and monetary policy stances.
Streamlining the mine permitting process
For many years, Nevada has been the crown jewel of US mining and has constituted one of the most attractive destinations worldwide for exploration companies. “Nevada presents all the right ingredients for exploration projects to succeed,” expressed Evandra Nakano, CEO of the newly created gold explorer Infield Minerals (TSXV:INFD), when speaking about the factors that led to the company’s acquisition of the M1 and Desperado projects in Nevada.
The state has unparalleled geological potential, and even though it has undergone several cycles of exploration and development since the mid-1800s, explorers still see potential for more ore to be found, especially at depth. Exploration companies in the “Silver State” can benefit from excellent infrastructure, an abundance of professional services, and a skilled and educated workforce, with thousands of workers between the towns of Reno and Elko who are specialists at mining in Nevada. The state also has a climate and topography that allows for year-round exploration and mining.
Another characteristic that makes Nevada particularly attractive is that there is a large amount of federal land which is open to mineral entry. The Mining Law of 1872 established the ability for anybody, regardless of age, sex, or nationality, to locate a claim on lands open to mineral entry, providing the exclusive right to explore and extract mineral material.
This represents a great opportunity for explorers, but it can also be an additional burden in the sense that companies have to permit both with the Nevada Division of Environmental Protection (NDEP) and with the federal regulator, BLM, or US Forest Services. The permitting process can therefore be quite involved and lengthy.
Like in the rest of the US, it currently takes on average seven to 10 years to secure the permits needed to commence operations in Nevada. To put that into perspective, in Canada and Australia, which have similarly stringent environmental regulations, the average permitting period is two years. According to a survey conducted by the Nevada Bureau of Mines and Geology, the time and cost of permitting is currently the largest negative impacting factor on companies’ exploration activities. This is because the higher costs and increased risk that often arise from a prolonged permitting process can significantly reduce the expected value of a mine before production even begins and can even lead to mining projects becoming altogether financially unviable.
Therefore, while Nevada enjoys one of the best environments for exploration in the world, there are areas to be improved. Many agree that streamlining the minerals mining permitting process is paramount to allow companies to take full advantage of booming commodity prices, to maintain the state’s competitiveness in the global sphere, and to decrease US reliance on foreign sources of minerals.
Image courtesy of ioneer