You are here: Mining Surplus » Articles » Boom for local mine service companies, but survival of rural suppliers depends on new mines being approved

« Back to Articles

Boom for local mine service companies, but survival of rural suppliers depends on new mines being approved

Business in Vancouver - Joel McKay

July 1,2010

Projects to replace mines that have shut down could make or break B.C.'s resource support sector, say experts
As improved commodity markets allow Vancouver mining firms to ramp up business, small service and mining equipment supply companies eagerly await the trickle-down effect.
For Garth Kirkham it's a flood.
"When the markets are booming, I can barely keep up," said Kirkham. "It's back."
The Burnaby-based geologist runs the one-man show known as Kirkham Geosystems Ltd., a consulting company that provides 3-D modelling and resource estimates for mining companies.
Although mining's cyclical nature has left Kirkham superstitious - "I never like to call it a boom" - the resurgence is keeping his desk littered with projects.
Over the last several months, the market's bullish revitalization has meant hundreds of Vancouver mining companies are back in the field searching for mineral wealth.
Most of them are early-stage exploration ventures sinking their first drills into the ground or dusting off old resource estimates hoping they'll point to a lucky strike.
That's where Kirkham and his 3-D models come in.
He said the computer technology provides a detailed and precise audit trail of what a company did and why.
"It's very helpful in explaining to investors, 'This is the deposit, this is what it looks like.'"
Kirkham is considered a "qualified person" under National Instrument 43-101 guidelines, a set of rules for how Canadian mineral companies disclose information about their projects.
The guideline was created after the Bre-X scandal in the 1990s when what was reported to be a massive gold deposit turned out to be bogus.
43-101 meant more business for geologists across the country as mining companies were forced to comply with new guidelines.
Kirkham believes there's little competition in this niche of service businesses.
"I find it's not really a competitive thing, because there aren't that many professionals that do what we do," he said.
Patty Moore isn't surprised that business has picked up for geologists and engineers.
"On the engineering level, it's very busy right now, but whether it's trickled down to the nuts-and-bolts supply I'm not really sure yet," said Moore, business development manager at Wardrop Engineering Inc. in Vancouver.
Wardrop, a subsidiary of California-based Tetra Tech Inc. (NASDAQ:TTEK), provides engineering and technical services for the energy, infrastructure and mining sectors.
Moore, who's also the incoming chair for Mining Suppliers Association of B.C. (MSABC), said geology and engineering firms see the trickle-down business first because their services are the first elements that many mining projects require.
Kirkham said that he has a leg up on some suppliers because he can work on global projects from his office in Burnaby, a benefit that haulers, fabricators and manufacturers lack.
"For the suppliers to be truly affected, we need to get more mines open in B.C. or more approvals to build mines," Moore said.
Copper Mountain Mining Corp.'s (TSX:CUM) recently approved Princeton copper project is a "big boost" for the suppliers industry, said Moore. Further help could come if Taseko Mines Ltd. (TSX:TKO) and Terrane Metals Corp. (TSX-V:TRX) get their respective Prosperity and Mount Milligan projects underway.
Dave Sharples, the outgoing chairman of MSABC, works for SMS Equipment Inc., a mining equipment and parts supplier for the mining industry. He said hundreds of B.C.'s small service and supply companies will have a tough time without new projects.
"As they close projects in one area ... if those projects aren't replaced, the production isn't replaced, the small businesses just close up."
He said that's had a devastating effect on Interior towns, where an ongoing downturn in the forestry sector hasn't helped either.
Even though service firms in Vancouver may be doing well, Moore said the fate of the rural supply sector is contingent on new mines.
In order for new mines to be commissioned, she said the industry needs to do a better job of marketing its environmental, technical and regulatory advancements.

"The frustrating thing for mining companies is people tend to zero in on the negative ... they don't recognize how advanced the mining industry has become in recent years. We're not just out there raping the land, killing the fish. They just don't realize it.