Canada's miners fall into three distinct camps: Ernst & Young

    Sector has produced opportunists, innovators and survivors

    TORONTO, May 26 /CNW/ - Canada's mining industry has effectively been
divided into three camps as a result of the global economic recession - the
opportunists, the innovators and the survivors - according to a paper released
by Ernst & Young today, Mining and metals opportunities in adversity.
    For the most part, it's the major mining firms who represent the
opportunists. Those with strong balance sheets are looking at acquisitions
that are long life, low cost and minimal risk. But challenges abound as
sellers are looking to the past and buyers to the future. The result?
Valuation impasses that often prove too difficult to bridge.
    "After the past few years of high-profile cash deals, we are far more
likely to see future transactions that rely less on cash and more on share
swaps," said Tom Whelan, Leader of Ernst & Young's Canadian Mining and Metals
    Generally, the mid-tier players are the innovators, as they tend to be
relatively high-cost producers that are looking to devise creative solutions
for survival, including becoming willing targets for acquisition.
    The juniors tend to dominate the group that comprises the survivors,
those who have made conserving cash their number one priority. In many cases,
the juniors are suspending exploration altogether, or as much as they dare
without compromising mineral rights.
    "What we're seeing now in these three camps is an overall unwillingness
to take on additional risk," said Whelan. "This makes immediate sense, of
course, but there's another side to the story, which is the predicted and
inevitable scramble for scarce resources when the global economy recovers."
    In the pursuit to contain costs, miners have largely axed exploration,
with even gold exploration seeming too risky for investment. The entire
industry seems to have forsaken its research and development function (e.g.
exploration). This great reduction in exploration effort can only lead to
problems in a few years time, when, and not if, the global economy recovers.
    "The turning point for this recovery might be the massive fiscal stimulus
packages underway or the vast infrastructure programs that are planned," said
    Previous recessions have shown that metal supply exceeded demand for only
a short time. With the recent depletion of existing mines reflected in falling
grades, and the extended periods of time required to bring on new projects,
there is a likelihood of a severe supply constraint developing in many metals
and minerals, potentially causing prices to soar to new heights.

    About Ernst & Young

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advisory services. Worldwide, our 135,000 people are united by our shared
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For further information:

For further information: Amanda Olliver,, (416)
943-7121; Brooke McLachlan,, (604) 899-3597;
Marie-Eve Graniero,, (514) 874-4313

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