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					                                          General Review

Mike McMullen and Greig Birchfield                            by 22.7% to a record $33.6 billion in 2006, up from the
                                                              previous record of $27.4 billion set in 2005. Of this, metal
Mike McMullen is a Consulting Mineral Economist               production increased by a staggering 45.4% to $21.2 bil-
and Greig Birchfield is a Consulting Mineral                  lion, while nonmetallic production fell by 2.7% to
Statistician with the Minerals and Metals Sector,             $10.2 billion. Coal also declined, falling by 5.3% to
Natural Resources Canada.                                     $2.2 billion after experiencing a substantial increase in
Telephone: Greig Birchfield at 613-992-1470                   2005.
                                                              The value of total Canadian exports for non-fuel min-
                                                              ing and mineral processing products (including coal)2
OVERVIEW                                                      increased by 16.2% to $74.7 billion from $64.3 billion in
                                                              2005. The 2006 export figure represents 17.0% of Can-
                                                              ada’s total exports. Canadian imports of non-fuel mining
G    lobal economic activity continued to be buoyant in
2006 and was again led by impressive activity in China and
                                                              and mineral processing products (including coal) totaled
                                                              $62.0 billion, up 9.3%. As a result, the balance of trade
India. Global Gross Domestic Product (GDP) growth was         (total exports minus imports of these commodities) showed
estimated at 5.3%, up from the 4.9% experienced in 2005.      a surplus of $12.7 billion, up 68.1%.
Business investment was stronger and consumer spending
continued to be firm in most countries, notwithstanding       There were sharp price increases in global markets for
geopolitical uncertainties around the world, particularly     many of the major mineral commodities in 2006. Indeed,
in the Middle East. However, continuing higher energy         copper, nickel, zinc, uranium and platinum hit record highs.
prices, although down from the peaks of late 2005, con-       Ongoing favourable supply/demand conditions, coupled
tinued to affect global market dynamics. Again, as in 2005,   with increasingly active investor demand, provided upward
the global minerals industry experienced strong demand for    pressures on prices during the year. Activities of large
mineral commodities, including scrap and recycled materi-     investment funds and other large speculators had a notice-
als, which led to higher prices during the year.              able impact on price fluctuations, especially for certain
                                                              precious and major metals. The major base metals (nickel,
Canada’s real GDP, measured at market value in chained        copper, zinc, lead, and aluminum) were all higher at year-
2002 dollars, increased by 2.8% in 2006 to $1.28 trillion,    end compared to the start of the year. The precious metals
although growth was slowing throughout the year. Both         (gold, platinum, palladium, and particularly silver) were up
interest rates and inflation remained relatively low. The     strongly as 2006 came to a close.
average annual unemployment rate declined to 6.3% in
2006 from 6.8% in 2005 and the value of the Canadian          Significant developments affecting the Canadian mining
dollar in terms of the U.S. dollar appreciated by 6.8%,       industry in 2006 included:
averaging $0.8818 compared to $0.8253 in 2005. This
currency performance continued to erode cost advantages       • continuing higher prices for most mineral commodities
in some sectors and posed trade challenges for many Can-        produced in Canada;
adian producers. Industrial capacity utilization declined
from 84.2% in the first quarter of 2006 to 81.7% in the
fourth quarter. The balance of trade fell by 21.3% to         1 Throughout  this article, the volume and value of production are
$43.6 billion. The value of both exports and imports          based on estimates using shipments from domestic sources as the
increased. Canadian merchandise exports (Customs basis)       measure of mine production, as published in Canada’s Mineral
rose 0.9% to $440.2 billion in 2006, compared to              Production, Preliminary Estimates, Statistics Canada catalogue
$436.2 billion in 2005. Imports (Customs basis) totaled       no. 26-202-XIB. Foreign ores, for example, bauxite, are therefore
$396.5 billion, up from $380.8 billion in 2005, a 4.1%        not included.
                                                              2 Throughout this article, unless otherwise noted, the mineral

Preliminary estimates for the value ofproduction1 for all     industry does not include crude oil or natural gas.
sectors of the Canadian mining industry rose substantially

• corporate operating profits up for the fifth straight year;   (Customs basis) totaled $396.5 billion, up from $380.8 bil-
• production declines in Canada again for several major         lion in 2005 and $355.8 billion in 2004. The trade surplus
  mineral commodities;                                          was $43.1 billion in 2006, down from $55.4 billion in 2005
• the acquisition of Canadian mining icons Inco Limited         and $56.5 billion in 2004.
  and Falconbridge Limited by foreign-based mining
  companies;                                                    The Bank of Canada, which announces its key interest
• continuing consolidation in the gold mining sector;           rate on eight pre-set dates per year, began the year with
• the opening of Canada’s third diamond mine in                 its target overnight rate at 3.25%, then had four consecu-
  Nunavut;                                                      tive rate increases of 0.25% to reach 4.25% in May. It
• an increase in mining employment; and                         remained at that level for the remainder of the year. In the
• more mine openings than closings.                             United States, the federal funds rate increased steadily from
                                                                4.25% at the beginning of the year to 5.25% in June, and
Global economic growth is expected to decline in 2007           then remained unchanged for the balance of the year. Con-
to about 4.9%, with most economies experiencing growth          sequently, there was a spread of 1.00% between the key
rates lower than 2006 levels. China and India are again         U.S. and Canadian rates as 2006 came to a close.
expected to be world leaders in global economic growth.
Canada’s GDP growth is expected to be slightly lower in         The annual inflation rate (Consumer Price Index [CPI])
2007 at about 2.5%. Notably, the sustained robust global        averaged 2.0% in 2006 (the rate excluding food and energy
growth comes at a time of relatively high energy prices,        averaged 1.5%) compared to 2.2% in 2005 and 1.9% in
ongoing global geopolitical tensions, and concerns about        2004. In November, the Bank of Canada renewed its five-
inflation. Although softness in certain mineral commodity       year agreement with the Government of Canada to continue
prices is expected, overall, prices should remain buoyant       to conduct monetary policy aimed at keeping inflation,
in 2007. These robust commodity prices and the improved         as measured by the CPI, at 2%, with a control range of
financial climate experienced in the past several years by      1-3% around this target, until 2011. However, the Bank
Canadian companies should sustain higher exploration            announced that it will consider whether to cut its inflation
spending and development opportunities in the Canadian          target below the current level of 2% and will take the next
minerals industry in 2007.                                      three years to study whether to reduce its inflation target.
                                                                The bank has invited outside researchers to submit their
CANADIAN ECONOMY                                                Even though inflation and interest rates remained at low
The Canadian economy expanded in 2006 as GDP grew               levels during 2006, pressures were coming from higher
by 2.8% to $1.28 trillion, which was lower than the 3.1%        energy and commodity prices, particularly for oil and base
rate experienced in 2005 (these figures are expressed in        metals. The value of the Canadian dollar in terms of the
chained 2002 dollars). Quarter-over-quarter changes in          U.S. dollar averaged $0.8818, up from $0.8253 in 2005.
2006 declined from 0.8% in the first quarter to 0.4% in the     This represents a 6.8% increase. On June 12, the Canadian
second and 0.3% in the third. The rate increased slightly in    dollar closed at $0.9105, a 28-year high.
the fourth quarter to 0.4%. Consumer spending and non-
residential investment accounted for most of the growth in      Consumer spending remained strong in 2006 with continu-
2006. However, the stronger Canadian dollar, higher input       ing low interest rates and a buoyant economy. According
costs (particularly energy), and international competition      to Statistics Canada, retailers posted their highest annual
exerted continuing pressures on economic activity during        sales gain of the last nine years in 2006 as retail sales
the year.                                                       advanced 6.4% to $391.3 billion. This included new motor
                                                                vehicle sales, which increased by 2.3% to 1.67 million
Total private and public investment grew by 4.6% to             vehicles in 2006, the second highest annual sales level on
$311.1 billion in 2006 and the value of Canadian manu-          record, only exceeded by the 1.7 million recorded in 2002.
facturing shipments declined to $587.6 billion, down 0.8%       Again, strong buyer incentives and rebates were put in
from 2005. Statistics Canada’s Composite Leading Indica-        place, particularly by North American-based manufactur-
tor index (1992=100) increased from 210.2 in December           ers. However, higher prices for motor gasoline were hav-
2005 to 220.7 in December 2006, a gain of 5.0%. Indus-          ing a negative effect on sales of large vehicles and sport
trial capacity utilization averaged 85.3% in 2006, the same     utility vehicles throughout the year. On the production
as in 2005, although capacity utilization in the manufactur-    side, automotive manufacturers in Canada produced
ing sector declined throughout 2006 from 84.6% in the first     1.4 million passenger cars in 2006, up 3.2% from
quarter to 81.4% in the fourth.                                 1.3 million in 2005.

Total Canadian merchandise exports (Customs basis)              The Canadian Real Estate Association reported that
increased to $440.2 billion in 2006, compared to                existing house sales across Canada on the Multiple Listing
$436.2 billion in 2005 and $412.3 billion in 2004. Imports      Service (MLS) reached the second highest level on record
                                                                                                                       GENERAL REVIEW               1.3

in 2006 at 483 609 units, a decline of just 0.04% from the              a rate of 9.2%. Both of these rates were higher than those
level recorded in 2005. The national MLS residential aver-              of 2005. The ASEAN-4 nations (Indonesia, Malaysia, the
age price reached $276 974 in 2006, representing an annual              Philippines, and Thailand) had a combined growth rate
increase of 11.1%. This was the eighth consecutive annual               of 5.4%, up from 5.2% in 2005. The economies of Hong
record for the average residential price and the largest                Kong and Singapore expanded by 6.8% (down from 2005)
annual increase recorded by the MLS since 1989. New                     and 7.9% (up from 2005), respectively. The Euro area
housing starts in Canada, as tabulated by Canada Mortgage               rebounded in 2006, expanding by 2.9%, compared to only
and Housing Corporation, increased by 0.8% to                           1.5% the previous year. The United Kingdom’s expansion
227 395 units, which is the second highest total in                     also rebounded in 2006 to 2.8%, up from 1.9% in 2005.
18 years, only surpassed by the 233 431 units reached in                The Japanese economy accelerated by 2.2% in 2006 from
2004. Overall, building construction remained robust as                 1.9% the previous year. The U.S. economy expanded in
Statistics Canada announced that the value of building per-             2006 to 3.3%, up slightly from 3.2% in 2005.
mits issued by municipalities reached a new annual record
of $66.3 billion in 2006, up 9.1% from the previous record
of $60.8 billion in 2005. Of this total, residential permits            CANADIAN MINERAL INDUSTRY
accounted for $41.1 billion, an increase of 6.0% over
2005, while the value of non-residential permits jumped                 The Canadian mineral industry can be characterized by the
by 14.5% to $25.2 billion. These building permit values in              following four stages of processing activity:
both the residential and non-residential sectors reached new
highs in 2006.                                                          • Stage 1: Mineral extraction and concentrating industry
                                                                          (for example, gold mining, and sand and gravel
The average annual unemployment rate declined to 6.3%                     quarrying);
in 2006 from 6.8% in 2005 and 7.2 % in 2004, with the                   • Stage 2: Smelting and refining industry (for example,
December 2006 rate being 6.1%, a 30-year low. Employ-                     nonferrous smelting and refining, alloying, and the
ment rose by 2.1%, or 346 000 net jobs. In December,                      production of primary steel);
employment in Canada stood at 16.6 million, of which                    • Stage 3: Nonmetals- and metals-based semi-fabricating
13.6 million jobs were full-time. Declines in manufactur-                 industries (for example, copper rolling, casting and
ing employment continued.                                                 extruding, and concrete products); and
                                                                        • Stage 4: Metals fabricating industries (for example,
Global economic growth (real GDP) increased in 2006                       manufacturing of ornamental metal products and
to 5.3%, compared to 4.9% in 2005, 5.3% in 2004, and                      machine parts).
3.9% in 2003. Growth rates among individual countries or
regions varied considerably in 2006. China again led the
way with a growth rate of 10.7%, followed by India with                    CANADIAN MINERAL INDUSTRY IN 2006

                                                                           Leading Mining Indicators                2005        2006     Change

                                                                    %      Value of non-fuel
  Leading Indicators                     2005       2006    Change           mineral production
                                                                             (excluding oil and gas)
  Real GDP ($ billions,                                                      ($ millions)                         27 397      33 603       +22.7
     1997 chained dollars)             1 247.8    1 282.2      +2.8        Exploration expenditures
  Consumer prices                                                            ($ millions)                          1 305       1 728       +32.4
     (% annual change)                   +2.2       +2.0        n.a.       Metal Price Index
  Operating profits                                                          (1997=100)
     ($ billions)                       215.9      231.7       +7.3          Precious metals                       137.2       190.8         n.a.
  Unemployment rate                                                          Base metals                           162.4       298.7         n.a.
     (% annual average)                    6.8        6.3       -7.4       Direct mining
  Merchandise trade                                                          employment (000)                       46.0        49.2         -6.8
     balance (balance of                                                   Value of minerals and
                                                                             mineral products
     payments basis) ($ billions)        64.9       53.6       -17.3
                                                                             exports ($ billions)                   64.3        74.7       +16.2
  Housing starts (000)                  225.5      227.4        +0.8
  Canada/U.S. exchange rate                                                Mining company
     (annual average)                  0.8253     0.8818       +6.8          operating profits
  International current                                                      ($ billions)                             4.0         4.6      +15.1
                                                                           Worldwide mine equity
     account balance
                                                                             financing ($ billions)                 12.1          5.0     +141.2
     ($ millions)                    31 802.0    24 342.0      -23.5

  Global economic output
                                                                           Sources: Natural Resources Canada; Statistics Canada; Gamah
    (% change)                           +4.9       +5.3        n.a.
                                                                           n.a. Not applicable.
  Sources: Statistics Canada; Bank of Canada; Canada Mortgage and          Note: All the indicators above, with the exception of the Metal Price
  Housing Corporation; International Monetary Fund.                        Index and mining company operating profits, include the coal mining
  n.a. Not applicable.                                                     industry.

In 2006, the overall value of production of the Canadian       ingly, both nonmetals and coal declined in value; however,
mining, mineral processing and metal-producing industries      the unprecedented increase in the value of metal production
totaled approximately $77 billion. This amount includes        led to the sizeable overall increase. Nickel was Canada’s
the value of production from Canadian mined ores, con-         leading mineral commodity, accounting for 18.4% of the
centrates, and aggregates ($33.6 billion). The remainder       Canadian total. Again, as in 2005, the value of produc-
(approximately $43.4 billion) represents the value of pro-     tion of most mineral commodities benefitted greatly from
duction realized from the smelting and refining of domestic    higher prices. In almost all cases, the increase in the value
and imported ores, concentrates and recyclables, as well as    of production for specific metals exceeded that of the
from steel and aluminum production and oil sands mining.       change in volume for that metal.

The emphasis of this article, however, focuses on the activ-   The value of metal production rose 45.4% to a record
ities of the mining industry (Stage 1), although a descrip-    $21.2 billion in 2006, from $14.6 billion in 2005, as signifi-
tion of the mineral industry from Stages 1 to 4 provides a     cant increases occurred in the values for zinc (+101.5%),
more comprehensive picture of its importance to Canada.        copper (+78.8%), nickel (+75.9%) and uranium (+26.4%).
Unless otherwise noted, in the context of this article, the    Six metals had a value of production in excess of $1 bil-
mineral industry should be taken to exclude the extraction     lion with five over $2 billion. Nickel was Canada’s leading
and processing of crude petroleum from conventional and        metal with a value of $6.2 billion followed by copper at
non-conventional sources and natural gas, but to include       $4.6 billion, iron ore at $2.6 billion, gold at $2.2 billion,
both the coal and uranium mining industries.                   and zinc at $2.1 billion. Uranium was at $1.4 billion.
                                                               However, of these six commodities, only nickel, copper
                                                               and iron ore experienced increases in the volume of pro-
GDP OF THE MINERAL INDUSTRY                                    duction during 2006.

The mineral industry for GDP is described statistically        The table below shows the value and volume movements
by Statistics Canada by the following industry groupings:      of the major mineral commodities produced in Canada for
mining, nonmetallic mineral product manufacturing,             the years 2005 and 2006.
primary metal manufacturing, and fabricated metal product
manufacturing. On this basis, in 2006, the mineral industry
                                                                  VALUE OF CANADIAN MINERAL PRODUCTION (1)
contributed $39.9 billion to Canada’s total GDP, a very
slight decrease compared to the 2005 level of $40.0 billion,                                      2005 (r)      2006 (p)       Change
and it represented 3.7% of Canada’s total GDP of                                                       ($ millions)               (%)
$1091.7 billion. (In this section, all figures are based on
GDP at basic prices in chained 1997 dollars.) Mining              Metallic minerals              14 582.6      21 199.3          45.4
                                                                  Nonmetallic minerals           10 485.5      10 199.0          -2.7
(coal mining, metal mining, and nonmetal mining) contrib-
uted 24.5% to the mineral industry’s GDP in 2006, while           Total                          25 068.1      31 398.2          25.3
nonmetallic mineral product manufacturing contributed a           Coal                            2 329.0        2 205.1         -5.3
further 12.9%. Primary metal manufacturing accounted
for 30.0% and fabricated metal product manufacturing              Total minerals                 27 397.1      33 603.3          22.7

accounted for the remaining 32.6%.
                                                                  Sources: Natural Resources Canada; Statistics Canada,
                                                                  Canada’s Mineral Production, Preliminary Estimates , 2006,
For mining in 2006, GDP declined by 1.1% to $9.8 billion          catalogue no. 26-202-XIB.
as coal mining fell by 10.5% to $817 million and non-             (p) Preliminary; (r) Revised.
metallic mining fell by 1.1% to $4.1 billion. Metal mining        (1) The value of production is based on shipments.
increased by 0.9% to $4.6 billion. (Due to the nature of          Note: Numbers may not add to totals due to rounding.
the chaining process, components of a larger whole are not
additive.) GDP for services related to mining and oil and
gas extraction was off by 2.7% at $5.9 billion in 2006.        The value of nonmetals production in 2006 fell by 2.7% to
                                                               $10.2 billion from the record high of $10.5 billion reached
                                                               in 2005. Declines in the value of production for potash
                                                               (-9.2%) and diamonds (-9.7%) were the main reason for
CANADIAN MINERAL PRODUCTION                                    the fall. Production values in excess of $1 billion were
                                                               recorded by five nonmetal commodities. Potash at $2.2 bil-
Production From Canadian Mines                                 lion was Canada’s leading nonmetal, and the only nonmetal
and Quarries                                                   with a value of production in excess of $2 billion. Potash
                                                               was followed by cement at $1.7 billion, diamonds at
The value of production of the mineral industry (metallic      $1.6 billion, stone at $1.3 billion, and sand and gravel at
minerals + nonmetallic minerals + coal) in 2006 increased      $1.2 billion. For these five leading nonmetals, only dia-
substantially by 22.7% to a new record of $33.6 billion, up    monds had a production increase in 2006.
from $27.4 billion in 2005, the previous record. Interest-
                                                                                                                                              GENERAL REVIEW                1.5

Figure 1
Value of Mineral Production, Percent Shares by Commodity and by Province and Territory, 2005 and 2006

                                                                                 $27.4 Billion
                        Percent of Total by Commodity                                              Percent of Total by Province and Territory
                                                                                                                 Yukon 0.1%      Nova Scotia 1.1%
                                                        Zinc 3.8%                             Prince Edward Island 0.02%               New Brunswick 3.3%
                Other 15.2%                                   Uranium 4.1%                                  Nunavut 0.01%
                                                                                                                                           Manitoba 4.6%
                                                                     Sand and gravel 4.3%
                                                                                                                                                    Alberta 4.7%
                                                                                                Ontario                                                 Newfoundland
                                                                         Stone 4.4%
                                                                                                27.2%                                                   and Labrador
                                                                                Cement 6.1%
 Nickel 12.8%                                                                                                                                              Northwest
                                                                                                                                                         Territories 6.5%

                                                                                Diamonds 6.4%

     Copper 9.4%
                                                                          Gold 7.6%

                                                                                                                                                  Saskatchewan 13.9%
                                                                                         British Columbia
                Potash 8.9%                                                                    18.0%
                                                                 Coal 8.5%
                              Iron ore 8.5%

                                                                                 $33.6 Billion

                        Percent of Total by Commodity                                              Percent of Total by Province and Territory
                                                                                                                               Nova Scotia 0.9%
                    Uranium 4.3%                   Diamonds 4.7%                                            Yukon 0.1%
                                                                                                                                 Alberta 3.9%
                                                                                                       Nunavut 0.1%
                Stone 3.8%                                  Cement 5.1%                   Prince Edward Island 0.01%                      New Brunswick 4.4%
                                                                    Zinc 6.2%                                                                  Territories 4.9%
Sand and gravel 3.5%                                                                              Ontario
                                                                                                                                                       Manitoba 6.2%
                                                                          Coal 6.6%
    Other 12.8%

                                                                                Potash 6.6%
                                                                                                                                                          and Labrador

                                                                             Gold 6.7%

      Nickel 18.4%                                                                                                                                    Saskatchewan
                                                                     Iron ore 7.7%
                                                                                              British Columbia                                           11.4%

                                                     Copper 13.7%                                                                      Quebec 14.1%

Sources: Natural Resources Canada; Statistics Canada.
Notes: The provincial/territorial shares may not add to 100% due to rounding.

The value of production for coal totaled $2.2 billion in          MINERAL COMMODITY PRICES
2006, down 5.3% from 2005. Production fell by 3.6% to
63.0 Mt.                                                          Most mineral and metal commodity prices continued to
                                                                  rise in 2006, with many showing significant gains during
Based on the value of production for 2006, the top com-           the year as the commodity boom cycle continued. China
modities were nickel ($6.2 billion), copper ($4.6 billion),       and India again dominated the markets for many of these
iron ore ($2.6 billion), gold ($2.2 billion), potash ($2.2 bil-   commodities, while increased investor activity also had a
lion), coal ($2.2 billion), zinc ($2.1 billion), cement           significant impact on the prices of many of the major com-
($1.7 billion), diamonds ($1.6 billion), uranium                  modities. With the exception of copper, which peaked in
($1.4 billion), stone ($1.3 billion), and sand and gravel         mid-year, the major metals finished 2006 at or near their
($1.2 billion).                                                   highs for the year and up significantly from the beginning
                                                                  of the year. Indeed, record high price levels were observed
In terms of production of Canada’s leading minerals,              for copper, nickel and zinc in 2006. Precious metals traded
increases in shipments of 5% or greater were recorded by          higher with silver showing the most impressive gain over
cobalt, iron ore, lead, nickel, diamonds, gypsum, and sul-        the year. Gold and silver traded at their highest levels since
phur (both elemental and in sulphur gas), whereas declines        1980 and 1990, respectively, while platinum also traded at
of 5% or more were experienced by gold, molybdenum,               record levels. Prices for metallurgical coals, thermal coals,
silver, uranium, and potash.                                      and iron ore pellets declined after significant gains in 2005,
                                                                  while other iron ore products went up in price.
Geographically, the importance of the industry may be
more significant on a regional and community basis as, in         Based on trading on the London Metal Exchange (LME)
many parts of Canada, particularly in the North, it provides      (daily spot closings), nickel opened 2006 at US$6.13/lb, its
a major economic stimulus. About 100 communities across           low for the year, and finished 2006 strongly at US$15.52/lb,
Canada with a total population of approximately 600 000           an increase of 153.2% during the year. The high for the
depend on the mineral industry.                                   year was reached in mid-December at US$16.08/lb. LME
                                                                  nickel inventories began the year at 35 994 t, moved to their
Regionally, four provinces continued to dominate the value        high for the year in early February at 37 218 t, and declined
of Canada’s mineral output, accounting for 70.2% of the           significantly for the rest of the year to close 2006 at 6594 t.
total in 2006. Ontario contributed the largest share of this      The low for the year was reached in early October at 3930 t.
output at 27.9% of the total value while British Columbia         Strong demand growth for stainless steel, particularly in
accounted for 16.7%, Quebec for 14.1%, and Saskatch-              China, coupled with concerns about global nickel supplies,
ewan for 11.4%. For the other provinces and territories,          fueled ongoing upward pressures on prices in 2006.
Newfoundland and Labrador was at 9.3%, Manitoba was at
6.2%, the Northwest Territories was at 4.8%, New Bruns-           Copper opened the year at US$2.10/lb, the low for the year,
wick was at 4.4%, Alberta was at 3.9%, Nova Scotia was            and finished 2006 at US$2.85/lb, a gain of 35.7%. The
at 0.9%, the Yukon was at 0.1%, Nunavut was at 0.1%, and          high was reached in mid-July at US$3.73/lb. Prices were
Prince Edward Island was at less than 0.1%.                       driven higher in response to supply disruptions, strong
                                                                  demand growth, and low inventories, particularly in the
For the four leading provinces, the value of mine output in       first half of the year. Copper stocks began the year at
Ontario increased by 26.3% to $9.4 billion, British               96 175 t, fell to a year low of 89 600 t in early July, and
Columbia was up by 14.1% to $5.6 billion, Quebec was              then moved up markedly in the last quarter to end the
up by 20.8% to $4.7 billion, and Saskatchewan was up by           year at 190 575 t, the high for 2006. Aluminum began the
1.1% $3.8 billion.                                                year at US$1.03/lb, declined slightly to US$1.028/lb in
                                                                  early January, and increased thereafter to finish the year at
Strong metal and industrial mineral prices since 2003             US$1.29/lb, an increase of 25.5%. The high for the year
have encouraged companies to develop new mines and to             was in mid-December at US$1.31/lb. Continuing supply
redevelop previously closed mines that still have unmined         shortfalls coupled with strong market fundamentals led to
reserves and/or resources. Preliminary estimates, based on        higher prices. Inventories increased from 646 200 t at the
2005 and the first half of 2006 (the latest data available),      beginning of the year to 793 350 t in early March, and then
indicate that about 11 mines, including 4 new mines, were         remained in a relatively tight range, falling to a low of
scheduled to open in 2006. The expected new mines are a           661 550 t in mid-December and ending the year at
copper-zinc mine in Newfoundland and Labrador, a gold             698 425 t.
mine in Ontario, a coal mine in British Columbia, and a
diamond mine (Jericho) in Nunavut. Three gold mines in            The price of zinc increased substantially in 2006, ending
Quebec, two nickel-copper mines in Ontario, a gold mine           the year at US$1.96/lb, compared to US86.7¢/lb at the
in Manitoba, and another gold mine in British                     beginning (its low for the year), an increase of 126.5%.
Columbia were expected to be redeveloped. For 2007,               The high for the year was US$2.10/lb set in late November.
based on the continuing strength of world demand and min-         Demand was strong throughout the year and with falling
eral and metal prices, some 20 mines are expected to open         inventories, particularly in the second half of the year,
or re-open.
                                                                                                      GENERAL REVIEW       1.7

prices were subject to strong upward pressures. Inventor-       oxide was down from US$28.50-$30.00 to US$25.00-
ies began the year at 393 300 t, their high for the year, and   $26.00/lb in the same period. Potash was quoted at
steadily decreased to reach 84 825 t, their low for the year    US$170-$173/t for standard grade f.o.b. Vancouver, up
in early December, before recovering to finish the year at      from US$145-$148/t at the end of 2005. The price for sul-
90 475 t. Lead began 2006 at US49.9¢/lb, declined to its        phur, f.o.b. Vancouver, at the end of 2006 was US$39-$56/t,
low of US$41.6¢/lb in mid-June, and then moved up to            compared to roughly US$60-$65/t a year earlier.
close out the year at 80.5¢/lb, up 61.3% for 2006. The high
of the year was set in mid-December at 82.1¢/lb. Increased      International coal and iron ore prices are largely deter-
global consumption, led by China, and a tight supply chain      mined by annual Japanese reference or benchmark contract
resulted in higher prices. Stocks began the year at             pricing set as of April 1 of each year. On this basis, the
42 000 t, increased to 117 900 t in mid-June, declined to       price in 2006 for metallurgical coal (premium hard coking
their low of 39 225 t in early December, and then climbed       grade) fell by 10.2% to US$114.00/t f.o.b., while thermal
slightly to close the year at 41 050 t.                         coal (steaming coal) dropped slightly by 0.9% to
                                                                US$52.50/t f.o.b. Reference prices for iron ore fines and
For precious metals (LME daily spot closings), gold             lump ore into the Japanese market (Hamersley benchmark
closed out the year at US$635.70/oz, up by 19.9% from           pricing) increased by 19.0% to US73.45¢/natural metric
US$530.00/oz at the beginning of 2006. Gold reached             tonne unit f.o.b. and US93.74¢/natural metric tonne unit
26-year highs in mid-May, due in large part to the activ-       f.o.b., respectively. Iron ore pellet prices for European
ities of hedge funds and other large speculators, reaching      markets (CVRD benchmark pricing), on the other hand,
$725.00/oz. As well, Exchange Traded Funds (ETFs)               were set 3.0% lower at US112.04¢/natural metric tonne
were an attractive method through which both retail and         unit f.o.b.
institutional investors chose to access gold. The low for
the year was US$524.75/oz set in early January. Against         Specific Canadian experience in 2006 showed that for
the ongoing backdrop of geopolitical factors, particularly      Canadian export coal, the Elk Valley Coal Partnership,
conflicts in the Middle East and the increasing weakness        owned by Fording Canadian Coal Trust (60%) and Teck
in the U.S. dollar, especially versus major international       Cominco Limited (40%), reached agreement with its major
currencies such as the Euro, gold continued to be viewed        customers for its hard coking coal at an average price of
as a place to put funds in 2006. Silver was robust in 2006,     US$107.00/t f.o.b., down 12.3% from US$122.00/t in
benefitting from increasing use in electronics and medicine,    2005. For Canadian iron ore, the Iron Ore Company of
and particularly from ongoing strong investment demand          Canada (IOC) announced a price agreement for 2006 deliv-
activity. Indeed, when Barclays Capital began offering a        eries with European steelmaker ThyssenKrupp Stahl AG
silver-backed ETF in April, the metal had its biggest gain in   for IOC Carol Lake Acid Limestone iron ore pellets
11 years. Silver prices traded at their highest levels          (US115.86¢/natural metric tonne unit f.o.b. Sept-Îles,
since the early 1980s in May, closing at an LME high of         Quebec, a decrease of 3.5% over 2005) and IOC Carol
US$14.94/oz, which was up from its low of US$8.83/oz            Lake iron ore concentrate (US78.25¢/natural metric tonne
in early January. Silver started the year at US$9.04/oz and     unit f.o.b. Sept-Îles, Quebec, an increase of 17.3% over
closed out 2006 at US$12.90/oz, an increase of 42.7% for        2005). Pellet products account for about 80% of IOC’s
the year.                                                       production with concentrates accounting for the remaining
The price of platinum rose in 2006 from US$982.00/oz at
the beginning of the year, its low for the year, to
US$1117.00/oz at year-end, an increase of 13.7%. The            RESERVES
high was achieved in mid-May at US$1335.00/oz. Strong
industrial demand and investor activity continued to exert      Canadian reserves are estimated from information con-
upward price pressures on platinum. Palladium began the         tained in annual and other corporate reports, and from the
year at US$265.00/oz, also its low for the year, reached its    responses of mining companies to the annual Federal-
peak in mid-May at US$404.00/oz, and ended the year at          Provincial/Territorial Survey of Mines and Concentrators.
US$323.50/oz. The end-of-year price was up 22.1% from
the beginning of the year. Palladium benefitted in 2006 at      In 2005, while Canadian reserves of lead, zinc and silver
the expense of platinum by being a cheaper alternative in       continued to decline, reserves of copper, nickel, molyb-
jewellery and, to some extent, in autocatalyst markets.         denum and gold increased by factors of 19%, 3%, 19% and
                                                                21%, respectively.
For other mineral commodities, the average spot price for
uranium (U3O8) was quoted at US$72.00/lb at the end of          The continuation of strong metal prices through 2006,
2006, a stunning 97.9% increase over US$36.38/lb a year         together with industry optimism and its determination to
earlier. Similarly, the long-term contract price for uranium    bring new deposits into production, make it probable that
almost doubled to US$72.00/lb from US$36.13/lb in the           Canadian reserves of copper, nickel, molybdenum, silver
same time period. At year-end, high-grade cobalt was sell-      and gold increased significantly in 2006. Canadian
ing at US$24.50-$26.00/lb, up substantially from                reserves of zinc likely rose slightly in 2006, while reserves
US$14.00-$15.50/lb a year earlier, while molybdenum             of lead continued to decline.

EMPLOYMENT IN THE MINERAL                                      sented 65.7% of total exports with the European Union at
                                                               15.2%, Japan (Canada’s third largest export customer) at
INDUSTRY                                                       4.3%, China (Canada’s fourth largest customer) at 3.3%,
                                                               Mexico (Canada’s 10th largest customer) at 0.8%, and all
Combined employment in the four stages of the mineral          other countries at 10.7%. Exports to the top 20 countries
industry is estimated to have risen to 368 753 in 2006, up     accounted for 96.2% of total Canadian exports. For
3.4% from 2005. The minerals industry thus accounted for       Stage 1 (mining only), the United States accounted for
approximately 2.7% of the national employment level of         31.5% of exports.
13.5 million full-time workers in 2006 (2.2% of 16.5 mil-
lion total employment).                                        The value of total exports of metallic minerals and mineral
                                                               products (four stages of production) rose by 22.5% to
Employment in Stage 1 increased to an estimated 49 181,        $59.7 billion, compared to $48.7 billion in 2005. On a
compared to 46 046 in 2005. The 2006 level was the high-       commodity basis, significant increases in the value of
est since 2000. Employment in metal mining increased by        exports were exhibited by tungsten (+217.8%), zinc
5.2% to 24 791. Employment in the nonmetal mining sec-         (+85.5%), copper (+60.9%), nickel (+42.2%), titanium
tor also increased, from 18 024 in 2005 to 19 671 in 2006,     metal (+35.9%), gold (+28.9%), and uranium and thorium
as did employment in the coal mining sector, where             (+24.0%). Notable decreases were shown by molybdenum
employment levels rose to 4719, a 6.0% increase over the       (-28.6%), magnesium and magnesium compounds
4519 recorded in 2005. The 19 671 recorded in the non-         (-21.8%), chromium (-15.4%), and cobalt (-10.8%). Two
metal mining sector was the highest since 1981.                commodities, aluminum and iron and steel, accounted for
                                                               45.0% of these total exports in 2006.
Employment in the primary metal manufacturing industry
rose by 1.8% to an estimated 79 740, while employment in       For Stage 1 metallic commodities only, total exports
the nonmetal manufacturing industry increased to 55 521 in     increased by 28.1% to $8.0 billion in 2006. For individual
2006 compared to 53 066 the previous year. The primary         metallic commodities in Stage 1, exports were up for most
metal and nonmetallic mineral manufacturing industries         metals with sizeable increases exhibited by tungsten
together comprise Stages 2 and 3. In the primary metals        (+421.6%), platinum group metals (+128.9%), copper
industry, the main contributor to job growth was the non-      (+68.3%), silver (+48.0%), zinc (+44.6%), aluminum
ferrous (excluding aluminum) production and processing         (+36.8%), lead (+31.5%), and iron and steel (+29.5%),
industry, while cement and concrete product manufacturing      while declining exports were noted for gold (-26.4%) and
was the primary factor in the rise of the nonmetallic min-     molybdenum (-26.2%). Note, however, that when Stage 2
eral processing industry.                                      exports of gold are included, the value of gold exports
                                                               increased by 29.4% to $5.4 billion. By far the largest pro-
Employment levels in the fabricated metal manufacturing        portion of gold exports are counted in Stage 2. Three com-
industry (Stage 4) increased, rising from 178 727 in 2005      modities (copper, iron ore, and iron and steel) represented
to 184 311 in 2006, an increase of 3.1%. Most industries       67.0% of all Stage 1 metallic exports in 2006.
within the fabricated metal sector experienced gains in
employment levels.                                             The value of total nonmetals exports decreased by 4.3% to
                                                               $11.5 billion from $12.1 billion in 2005. Notable decreases
(The employment numbers above differ fairly significantly      were experienced by sulphur and sulphur compounds
from those published in previous years. In addition to         (-16.5%), potash and potassium compounds (-12.0%),
regular annual revisions, Statistics Canada improved its       chrysotile (asbestos) (-10.4%), nitrogen (-6.2%), and dia-
collection methodology. This improved methodology              monds (-3.2%). Increases of note occurred for gypsum
resulted in the changes seen here.)                            (+12.9%), mineral pigments (+8.3%), peat (+4.3%), and
                                                               glass and glassware products (+3.0%). Four commodities
                                                               (potash and potassium compounds, diamonds, nitrogen,
MINERAL INDUSTRY TRADE                                         and glass and glassware products) accounted for 58.3% of
                                                               total nonmetallic exports.
Canada is one of the world’s largest exporters of minerals
and metals. The export of these commodities and more           For Stage 1 only, total exports of nonmetallic commodities
refined mineral products has a significant impact on           fell by 8.2% to $5.3 billion from $5.8 billion in 2005.
Canada’s overall merchandise balance of trade, and hence       Exports of note that decreased were sulphur and sulphur
on the national standard of living. In 2006, the value of      compounds (-17.3%), potash and potassium compounds
total exports of minerals and mineral product exports for      (-12.0%), chrysotile (asbestos) (-10.5%), diamonds
the four stages of production (non-fuel, but including coal)   (-5.5%), and gypsum (-4.8%). Increases were experienced
increased by 16.2% to $74.7 billion from $64.3 billion in      by sand and gravel (+12.7%), salt and sodium compounds
2005 (Table 2). The United States was again by far the         (+7.4%), and peat (+3.4%). Potash and potassium com-
leading destination for Canada’s total minerals and mineral    pounds and diamonds accounted for 75.4% of all Stage 1
product exports with $49.1 billion in 2006. This repre-        nonmetallic exports in 2006.
                                                                                                     GENERAL REVIEW      1.9

In 2006, total exports of coal increased by 1.1% to $3.4 bil-   FINANCIAL INVESTMENT BY THE
lion, while coke declined from $108 million to $25 million.
Stage 1 coal exports were unchanged at $3.2 billion.            MINERAL INDUSTRY
The value of total imports of minerals and mineral products     Canada’s financial markets play a strong role in providing
(four stages) increased by 9.2% to $62.0 billion from           equity financing to Canadian and foreign mining compan-
$56.7 billion in 2005. Of this amount in 2006, shipments        ies. At the end of 2006, there were some 291 companies
from the United States accounted for 57.9% of the total         listed on the Toronto Stock Exchange (TSX) with a total
with the European Union at 9.0%, China at 7.5%, Mexico          quoted market value of approximately $287.7 billion. Over
at 3.3%, Japan at 1.8%, and all other countries at 20.6%.       35 of these companies had a market capitalization in excess
The top 20 countries accounted for 90.9% of total imports.      of $1 billion. In addition, there were 983 companies listed
For the four stages of production, total imports from the       on the TSX Venture Exchange with a total quoted market
United States accounted for 75.0% of Stage 1, 23.4% of          value of some $35.1 billion at the end of 2006. Taken
Stage 2, 62.2% of Stage 3, and 60.1% of Stage 4 imports.        together, the two exchanges list some 60% of the world’s
                                                                public mining companies.
The total value of metal imports rose to $52.1 billion in
2006 from $47.2 billion in 2005, an increase of 10.5%.          During 2006, 38.8% of the equity capital raised worldwide
Major increases took place for zinc (+151.1%), silver           to finance mining activity was raised on Canadian exchan-
(+55.7%), copper (+44.0%), gold (+36.7%), and platinum          ges. These funds were spent on mineral exploration and to
group metals (+16.4%), whereas large declines occurred for      finance capital spending on mining projects in Canada and
molybdenum (-19.8%) and nickel (-18.3%). Two commod-            around the world.
ities (iron and steel, and aluminum) accounted for 53.2% of
all metal imports in 2006.                                      Exploration Expenditures
For nonmetals, import values rose from $8.0 billion in          Final exploration data for 2005 show that exploration and
2005 to $8.3 billion in 2006, an increase of 4.4%. Com-         deposit appraisal expenditures amounted to $1304.8 mil-
modities of note included increases for diamonds (+40.4%),      lion, an increase of 10.8% over $1177.8 million in 2004.
graphite (+15.0%), salt and salt compounds (+9.0%), and         Preliminary figures for 2006 indicate an impressive
glass and glassware products (+4.4%), and decreases for         increase of 32.4% to $1727.8 million, with spending inten-
nitrogen (-11.3%), titanium oxides (-7.5%), and phosphate       tions for 2007 showing a further 9.3% increase to
and phosphate compounds (-7.0%). Two commodities                $1888.0 million.
(glass and glassware products, and clay and clay products)
accounted for 41.0% of total imports of nonmetals in 2006.      In 2006, increases in exploration and deposit appraisal
                                                                expenditures were experienced in all jurisdictions with the
Coal imports increased by 1.9% to $1.4 billion while coke       exception of Manitoba. Ontario ($341.6 million), British
imports fell by 25.4% to $111.9 million in 2006.                Columbia ($304.0 million), Quebec ($260.2 million), Sas-
                                                                katchewan ($236.3 million), Nunavut ($199.7 million), and
The balance of trade generated (total mining and mineral        the Northwest Territories ($129.8 million) accounted for
processing exports minus total mining and mineral process-      85.2% of total Canadian expenditures.
ing imports) rose by 68.1% in 2006 to $12.7 billion. This
trade surplus compares to $7.5 billion in 2005, $4.2 billion    The level of mineral exploration activity is closely linked
in 2004, and $3.0 billion in 2003. For the total Canadian       to mineral commodity prices. As commodity prices have
economy, the trade surplus was $43.6 billion in 2006, down      been very robust for the past several years, the mineral
from $55.4 billion in 2005 and $56.5 billion in 2004.           exploration industry has responded with increased activity.
                                                                In 2006, increases were experienced in each of the five
China has become an increasingly important customer for         commodity groupings: precious metals, base metals, dia-
Canada’s mining and mineral processing industry, ranking        monds, uranium, and other metal commodities. Other
as the fourth largest customer in 2006 behind the United        important factors that can influence exploration activities
States, the United Kingdom, and Japan. In 2006, Canada          are economic conditions and tax incentive measures.
exported $2.5 billion in minerals and mineral products to
China, up from $2.1 billion in 2005 and $1.4 billion in         In 2006, precious metals (mainly gold) accounted for
2004.                                                           38.6% of total exploration and deposit appraisal expendi-
                                                                tures, followed by base metals at 22.0%, diamonds at
Imports of these products from China have also increased        17.5%, uranium at 11.0%, and other mineral commodities
significantly. In 2006, the value of imports of minerals and    at 10.9%.
mineral products reached $4.7 billion, compared to
$3.9 billion in 2005 and $3.3 billion in 2004, making China     Capital Investment
Canada’s second largest importing country after the United
States for that year.                                           Mine complex development expenditures (including capital
                                                                expenditures for construction and machinery and equip-
                                                                ment) were estimated at $3.6 billion in 2005, up 30.9%

from $2.7 billion in 2004. Large increases were recorded         Major mergers and acquisitions continued at significant
in Quebec (precious metals), the Northwest Territories (dia-     levels in the Canadian mining sector during 2006. Accord-
monds), Saskatchewan (uranium and potash), Alberta               ing to Crosbie and Company, Inc., who produce data on
(coal), British Columbia (precious metals), and Nunavut          Canadian mergers and acquisitions, the value of activity for
(diamonds). These regions accounted for 64.2% of the             metals and minerals reached $54.0 billion (247 deals), a
total expenditures. While mine complex development               record level and a fivefold increase over $9.5 billion
expenditures (including capital expenditures) in Ontario         (87 deals) in 2005. Well-known Canadian corporate icons,
declined from $735 million in 2004 to $659 million in            such as steelmaker Dofasco Inc. and base-metal mining
2005, it remained the leading region in terms of mine com-       giants Inco Limited and Falconbridge Ltd., became targets
plex development expenditures. Spending intentions for           and were taken over. Significant consolidation also con-
2006 indicate a further increase of 16.5% to $4.1 billion.       tinued in the gold sector.
Repair expenditures for structures, machinery and equip-
ment fell to $1.4 billion from $1.6 billion in 2004, a drop of   Following bidding by ThyssenKrupp AG of Germany and
13.9%. Ontario and Manitoba accounted for most of this           Arcelor SA of Luxembourg that began in late 2005,
decline.                                                         Dofasco was purchased by Arcelor in February 2006 for
                                                                 $5.5 billion. Subsequently, Arcelor, as a defence against a
According to Statistics Canada, actual expenditures for          hostile takeover, put the Dofasco shares into a Foundation
capital for construction and for materials and equipment in      in the Netherlands called Strategic Steel Stichting. Later in
the mining and mineral processing industries were $7.3 bil-      November following the US$33.5 billion amalgamation of
lion in 2005. Preliminary actual figures for 2006 indicate a     Mittal Steel Company NV and Arcelor, the new company
slight decrease to $7.2 billion, while intentions for 2007       (Arcelor Mittal) requested that the Foundation be dissolved
indicate a rebound to $8.0 billion.                              so that Dofasco shares could be sold to ThyssenKrupp to
                                                                 satisfy anti-trust requirements of the amalgamation, but the
For the total economy in 2005, capital investment (con-          Directors of the Foundation refused. In January 2007, a
struction, materials and equipment) reached $273.2 billion.      court in the Netherlands ruled that the Trust could not be
Estimates for 2006 show an increase to $297.3 billion, with      forced into releasing the Dofasco shares. Therefore,
intentions for 2007 reaching $311.1 billion.                     Dofasco remains an operating unit of Mittal Arcelor.

Technology Investment                                            In late 2005, Inco made a friendly $12.8 billion offer for
                                                                 Falconbridge involving shares and cash that, mainly due to
Preliminary figures for 2005 indicate total intramural R&D       delays in getting regulatory approval from the U.S. Depart-
expenditures in the mining and mineral processing indus-         ment of Justice and the European Commission, had not
tries were $531 million (about 3.6% of total R&D spending        been completed by May 2006 when rival bids started. Teck
by all industries), compared to $542 million in 2004.            Cominco Limited made a $17.8 billion hostile share-cash
Intentions for 2006 indicate expenditures of $538 million.       offer for Inco only, and Xstrata Plc of Switzerland, a major
                                                                 global diversified mining group who already owned about
                                                                 20% of Falconbridge, made an all-cash bid of $16.1 billion
                                                                 for the rest of the Falconbridge shares that it did not already
HIGHLIGHTS IN THE CANADIAN MINING                                own. Subsequently, in an effort to thwart Xstrata and Teck
INDUSTRY                                                         Cominco, Inco-Falconbridge agreed to be taken over by
                                                                 Phelps Dodge Corp. in a share-cash deal that valued the
Corporate Developments                                           merger at about US$40 billion. In August, Companhia Vale
                                                                 do Rio Doce (CVRD) of Brazil, the world’s largest iron ore
Corporate operating profits in the Canadian mining indus-        producer, entered the bidding for Inco with an all-cash deal
try were $4.6 billion in 2006, compared to $4.0 billion in       worth over $19 billion ($86.00 a share). Also in August,
2005 and $3.3 billion in 2004. Profits in 2006, as in the        Xstrata was successful in obtaining Falconbridge in
two previous years, continued to benefit greatly from            exchange for $62.50 in cash for each common share of
strong commodity prices.                                         Falconbridge. With the redemption of Falconbridge’s
                                                                 preferred shares, the total consideration of the transaction
The average annual capacity utilization rate for mining in       was estimated at approximately $19.2 billion. Xstrata,
2006 stood at 83.9%, a decline of 8.8% from 92.0% for            which is organized along commodity lines, has renamed the
2005. For the last quarter of 2006, the annualized rate was      Falconbridge nickel operations Xstrata Nickel. In October,
81.5%, compared to 82.1% in the third quarter of the year.       CVRD’s cash offer of $86.00 per Inco common share was
The rate for primary metals declined through the year, from      successful and, in early January 2007, it announced that it
94.2% in the first quarter to 89.2% in the fourth. Capacity      had completed the amalgamation of Inco Limited and a
utilization in the nonmetallic mineral products industries       wholly owned subsidiary of CVRD that will continue as
declined during the year by 11.6% to 78.7%, while utiliza-       CVRD Inco Limited.
tion in the fabricated metals industry also declined by 7.8%
to 78.0% in the fourth quarter.                                  Merger and acquisition activity was quite buoyant in the
                                                                 Canadian gold sector in 2006 as consolidation continued.
                                                                                                      GENERAL REVIEW       1.11

Barrick Gold Corporation completed its US$10.4 billion            In mid-November, Kinross Gold Corporation launched a
takeover of Placer Dome Inc. in mid-March, making it the          friendly takeover bid for Bema Gold Corporation estimated
number one global gold producer. As part of this deal, Bar-       at US$3.1 billion. The all-share transaction involves a
rick sold four Placer Dome mines and other interests to           shareholder-approved plan of arrangement whereby each
Goldcorp Inc. for US$1.6 billion. This transaction was            Bema common share is exchanged for 0.441 of a Kinross
completed in May. Chief among these assets was the                common share (later adjusted in late December to 0.4447)
Campbell Red Lake mine, which is located adjacent to              and $0.01 in cash. Upon completion of the deal in early
Goldcorp’s Red Lake mine in Ontario.                              2007, 61% of the new company would be owned by
                                                                  existing Kinross shareholders and 39% by existing Bema
In September, Pioneer Metals Corporation announced that           shareholders. The merged company is estimated to have
over 80% of its shares had been tendered to Barrick Gold          mineral reserves and resources of 50 million oz of gold,
Corporation in Barrick’s friendly all-cash takeover of Pion-      80 million oz of silver, and 2.9 billion lb of copper. On a
eer at $1.00 a common share. When officially completed,           pro-forma basis for 2006, the new Kinross would have esti-
expected in early 2007, the value of the total transaction        mated production of 1.8 million oz of gold equivalent,
would be approximately $65 million on a fully diluted             growing 56% to approximately 2.8 million oz in 2009.
basis. Barrick made the bid in July following the rejection
by Pioneer of a hostile bid from NovaGold Resources Inc.          In early December, Barrick Gold Corporation said it had
at $0.57 a common share. Pioneer owns 100% of the Grace           ended its five-month-old hostile takeover bid for NovaGold
claims located immediately north of the Galore Creek gold-        Resources Inc. after picking up just 14.8% of the com-
silver-copper deposit in northwestern British Columbia,           pany’s shares. In November, Barrick said its offer to
approximately 150 km north of Stewart. The Galore Creek           acquire NovaGold stock was no longer conditional on it
deposit, owned by NovaGold, is currently in the permitting        getting a majority of the company’s shares. NovaGold
and feasibility stages. A final feasibility study for this        called Barrick’s bid of US$16.00 per share for the company
deposit completed in late October estimated proven and            a “low-ball” offer, even though Barrick had boosted it from
probable reserves at 540.7 Mt containing 5.3 million oz of        the US$14.50 a share it had originally offered in July.
gold , 92.6 million oz of silver, and 6.6 billion lb of copper.   NovaGold owns 70% and Barrick owns 30% of the Donlin
                                                                  Creek gold deposit in western Alaska. If Barrick spends
In early November, Goldcorp Inc. completed the acquisi-           US$32 million, completes a bankable feasibility study, and
tion of Glamis Gold Ltd. with Glamis shareholders receiv-         makes a decision to begin mine construction by Novem-
ing 1.69 Goldcorp shares and $0.0001 for each share of            ber 12, 2007, it will earn an additional 40% of this property
Glamis. Based on the share exchange, Goldcorp sharehold-          to hold 70%. In late September, an independent Prelimin-
ers own approximately 60% and Glamis shareholders own             ary Economic Assessment of the Donlin Creek gold project
approximately 40% of the new Goldcorp. The friendly               indicated an average life-of-mine production of 1.4 million
transaction was valued at US$8.9 billion and made the             oz/y of gold for 22 years at a cash cost of $276.00/oz.
company the world’s fifth largest gold producer based on
estimated 2007 production. Completion of the deal came            The Canadian diamond sector expanded in 2006 with the
shortly after the Divisional Court of the Ontario Superior        opening of Canada’s third diamond mine. As well,
Court of Justice dismissed an appeal by former Goldcorp           progress continued on the development of two other mines,
Chairman and its largest individual shareholder, Robert           and advanced exploration and development were under
McEwen, that Goldcorp was not obligated to hold a share-          way at several other diamond projects.
holder vote on the proposed transaction. With the acquisi-
tion of Glamis, Goldcorp estimated that it had doubled its        In mid-August, Tahera Diamond Corporation held the offi-
reserves and resources and expected to see production             cial opening ceremony of its Jericho diamond mine, which
increases of 50% for gold over the next four years. For           represented Canada’s third, and Nunavut’s first, diamond
2006, on an annualized basis, the new Goldcorp expected           mine. Construction of the mine was substantially com-
production of 1.75 million oz of gold, 13.5 million oz of         pleted during 2005, the first diamonds were produced in
silver, and 160 million lb of copper.                             January 2006, and Tahera declared commercial production
                                                                  on July 1, 2006. Under the terms of an offtake and finan-
Also, in early November, IAMGOLD Corporation com-                 cing deal, Tiffany and Co. takes the entire run-of-mine pro-
pleted its US$3 billion all-share friendly acquisition of         duction. From this, it purchases a significant amount for its
Cambior Inc. on the basis of 0.42 of a common share of            own manufacturing and design needs, and then sells the
IAMGOLD for each issued share of Cambior. As a result,            remainder for Tahera on the international market for a fee.
IAMGOLD shareholders own approximately 57% and                    In mid-November, the company announced that it had
Cambior shareholders own approximately 43% of the new             entered into an agreement with Teck Cominco Limited
IAMGOLD Corporation. Annual gold production is esti-              whereby Teck Cominco will purchase, on a private place-
mated at about 1.1 million oz. The new company                    ment basis, 30 million units of Tahera at a price of $1.00
announced that it now had total gold reserves of 9.7 mil-         per unit for gross proceeds of $30 million. Units will be
lion oz, total measured and indicated resources of close to       comprised of a total of 30 million common shares and com-
21 million oz, and inferred resources of 8 million oz.            mon share purchase warrants. Teck Cominco’s initial

investment will represent approximately 16% of Tahera’s       program outlined for any of the Fort-à-la-Corne kimberlites
issued and outstanding common shares, and its ownership       to date. The aim of the pre-feasibility study is to define a
could potentially go up to approximately 24.9% on a fully     National Instrument 43-101 compliant mineral reserve for
diluted basis if all warrants issued to Teck Cominco are      the Star project.
                                                              In early December, Peregrine Diamonds Ltd. began a third
De Beers Canada Inc. is currently constructing two mines      bulk sampling program on the 9-ha DO-27 kimberlite body
in Canada: Snap Lake in the Northwest Territories (N.W.T.)    of the WO (Tli Kwi Cho) Diamond Project Joint Venture
and Victor in Ontario. The Snap Lake project is located       (WOJV), which is located approximately 23 km southeast
approximately 220 km northeast of Yellowknife and will be     of the Diavik diamond mine in the Lac de Gras area of the
De Beers’ first mine outside of Africa and Canada’s first     N.W.T. The DO-27 kimberlite was discovered in 1993 by
fully underground diamond mine. Construction began with       Kennecott Canada Exploration Inc. and partners, and was
the opening of the winter road in February 2005. By mid-      subject to advanced drilling and sampling. Peregrine
August 2006, a total of nearly $432 million had been spent    obtained a 38.5% interest in the WO block in 2004. In the
on contracts and purchase orders for construction of the      past two years, work by Peregrine has been under way to
mine with a total investment to mid-2007 of $878 million.     further assess the potential of the DO-27 pipe through more
The mine will produce 1.5 million ct/y when in full produc-   drilling and bulk sampling. Following decisions about
tion and is scheduled to commence operation in the last       financial participation by the partners of WOJV in Decem-
quarter of 2007. De Beers’ Victor project, located near       ber, WOJV ownership now consists of Peregrine, the oper-
Attawapiskat in the James Bay region of Northern Ontario,     ator (71.74%), Archon Minerals Limited (17.48%), and
began its construction phase in 2006 and is scheduled to      DHK Diamonds Inc. (10.78%).
begin production in the last part of 2008. It is estimated
that the $1 billion mine will produce approximately           In mid-December, Ashton Mining of Canada Inc. reported
600 000 ct/y during its estimated production life of 12-      that it was making progress toward completion of the 2006
13 years. There are a number of other diamondiferous kim-     program at the Foxtrot property in north-central Quebec.
berlites on the Victor property and De Beers is conducting    Ashton and its 50:50 joint-venture partner, SOQUEM INC.,
further exploration work on the Tango Extension, Delta and    were continuing to complete the collection of a 10 000-t
India kimberlite within this group of kimberlites. A third    bulk sample from Renard 2, 3 and 4, three significantly
De Beers project, Gahcho Kue, a joint venture of De Beers     diamondiferous kimberlites that form part of the Renard
(51%), Mountain Province Diamonds Inc. (44.1%), and           cluster of nine bodies. Diamond results from the bulk sam-
Camphor Ventures Inc. (4.9%), is located at Kennady           ple of the three kimberlites are expected during the first and
Lake, approximately 300 km northeast of Yellowknife in        second quarters of 2007. In late July, Stornoway Diamond
the N.W.T. The project, with De Beers as the operator, is     Corporation announced its intention to acquire Ashton, as
currently in the permitting and advanced exploration stage    well as Contact Diamond Corporation, for shares and cash.
of development and is on target for production in 2012.       For Ashton, it is one common share of Stornoway plus
The Gahcho Kue diamond mine is projected to have a life       $0.01 in cash, and the cash consideration is equal to $1.25
in excess of 20 years, with full production of more than      in cash but is subject to pro-ration of the approximately
3 million ct/y over 15 years.                                 $13.6 million that will be allocated among all Ashton
                                                              shareholders who elect to receive the cash consideration.
In late September, following a lengthy legal dispute during   For Contact, it is on the basis of 0.36 common shares of
2006 brought on by De Beers Canada Inc. over control          Stornoway for each common share of Contact. Both trans-
of the exploration program and spending at the Fort-          actions were finalized in early 2007. Stornoway has expos-
à-la-Corne diamond joint venture project (FALC JV),           ure to approximately 18 million acres of prospective dia-
Shore Gold Inc., through its wholly owned subsidiary          mond properties spanning 40 properties in Canada and
Kensington Resources Ltd., acquired 100% of the project.      Botswana. These include several advanced-stage proper-
Shore purchased De Beers’ 42.245% interest for $180 mil-      ties such as Aviat, Qilalugaq, and Churchill in northern
lion, Cameco Corporation’s 5.51% interest for $23.5 mil-      Canada, where a total of 77 kimberlites have been discov-
lion, and UEM Inc.’s 10% interest for $42.6 million. Kens-    ered since 2002, of which 40 so far have proven to be
ington then sold 40% of the project to Newmont Mining         diamondiferous. The three-way combination is expected to
Corporation of Canada Limited for $170.4 million and          create a company with a market capitalization in excess of
retained the remaining 60% and will act as operator. Not-     $200 million and will become one of the leading, pure dia-
withstanding these events, significant advanced exploration   mond exploration and development companies in Canada.
activity continued during 2006 on the FALC JV kimberlite
deposits where over 60 kimberlites have been identified.      Other important corporate news in 2006 included, in mid-
                                                              August, Westdome Gold Mines Ltd. having the official
During the year, Shore continued with its $60 million pre-    re-opening of the Kiena underground gold mine, which is
feasibility program for its wholly owned Star kimberlite      located some 10 km from Val-d’Or, Quebec, at Lac de
located adjacent to the FALC JV, which is scheduled for       Montigny. The mine, with a long history dating back to the
completion by the end of 2007. This is the largest work       1930s, had been closed since 2002 when it was then owned
                                                                                                    GENERAL REVIEW       1.13

by McWatters Mining Inc. The mine/milling complex                Indian Sub-Continent and Europe were shipped from
began commercial production in early August and is fore-         Prince Rupert’s Ridley Terminals earlier in October.
cast to produce about 20 000 oz of gold in 2006, rising to
approximately 50 000 oz in 2007.                                 In mid-October, Hillsborough Resources Limited
                                                                 announced that it had signed a definitive asset transfer
In late August, Ascot Resources Ltd. received a Mines Act        agreement with NEMI Northern Energy and Mining Inc.
permit from the Government of British Columbia to allow          and Anglo Coal Canada Limited whereby the northeastern
it to begin development of an aggregate quarry and ship-         British Columbia metallurgical coal assets of Hillsborough,
loading facility at Swamp Point on the Portland Canal. The       NEMI, and Anglo Coal Canada will be consolidated into a
project site is located 50 km south of Stewart. The pro-         limited partnership. This consolidation (into Peace River
ject’s lifespan is anticipated to be a minimum of 18 years       Coal LP) took place in November 2006 with Anglo Gold
with a maximum production capacity of 3.3 Mt/y of aggre-         receiving 60% of the partnership and Hillsborough and
gate. Initial capital investment is estimated at $27.5 mil-      NEMI each receiving 20%. Anglo Gold will be the oper-
lion. The company indicated that it intends to maximize          ator.
local employment and contracting activities, primarily from
Nisga’a communities and the communities of Stewart and           In late October, the Cigar Lake joint-venture uranium pro-
Prince Rupert.                                                   ject (Cameco Corporation, 50%; Areva Resources Canada
                                                                 Inc., 37%; Idemitsu Uranium Exploration Canada, 8%; and
Also in late August, San Gold Corporation officially             TEPCO Resources Inc., 5%) suffered a major setback when
re-opened an underground gold mine at Bissett, Manitoba,         significant flooding filled the underground workings. The
which is about 250 km northeast of Winnipeg, with the            mine had been on schedule to start production in early
pouring of its first two gold dore bars. The new Rice Lake       2008. The deposit is the world’s largest undeveloped uran-
mine, which is the only primary gold mine in Manitoba,           ium deposit with proven and probable reserves of 551 000 t
was originally the San Antonio mine, a successful gold           with a grade of 19.06% U3O8. By year-end, Cameco, who
mine that operated for more than 35 years before shutting        is the operator, had begun a phased remedial action plan to
down in 1968. It re-opened briefly several times, the last       restore the underground workings by drilling holes to the
being in 1998. Also called the Bissett mine, it last ceased      source of the water inflow. This was to be followed by
production in 2001. New commercial operations began in           pumping in concrete, the removal of water from under-
the spring of 2006 at a mining rate of 400 short tons per        ground areas, ground freezing in the area of the inflow,
day (st/d), which is expected to double in 2007. The mill is     restoring other underground areas, and resumption of mine
rated at 1250 st/d. The company expects to produce about         development.
60 000 oz in 2007.
                                                                 Also in late October, EuroZinc Mining Corporation offi-
In early September, the Iron Ore Company of Canada               cially merged with Lundin Mining Corporation on the basis
(IOC) announced that it had reached an agreement with the        of one EuroZinc share for 0.0952 Lundin shares. This fol-
Labrador Iron Ore Royalty Income Fund for exclusive min-         lowed the announcement in August that the two Vancouver,
ing rights to Wabush #3, a mining deposit located in Labra-      British Columbia-based companies had entered into an
dor West. The deposit is positioned adjacent to IOC’s            agreement to merge through a Plan of Arrangement. The
existing mining, processing and rail infrastructure. Esti-       new company, to be called Lundin Mining Corporation,
mates from previous drilling programs (1940s-1960s) indi-        will operate four mines in Portugal (Neves-Corvo), Sweden
cated that Wabush #3 had resources in excess of 400 Mt           (Zinkgruvan and Storliden), and Ireland (Galmoy), and in
with an iron content of 38%. IOC will commence a new             2007 a fifth mine (Aljustrel) is planned to start production
drilling program during the fourth quarter of 2006 to con-       in Portugal. Production for 2006, on a combined basis, is
firm this work.                                                  estimated to be approximately 180 000 t (400 million lb) of
                                                                 contained zinc, 90 000 t (205 million lb) of contained cop-
In early October, Western Canadian Coal Corp. officially         per, 45 000 t (100 million lb) of contained lead, and 6 mil-
opened its $325 million Wolverine metallurgical coal mine        lion oz of contained silver.
complex located near Tumbler Ridge in northeastern
British Columbia. The mine began production in late July         In late October, Norsk Hydro announced that it was closing
and is expected to produce 1.35 Mt of hard coking coal in        its magnesium facility at Bécancour, Quebec, during the
the company’s fiscal year ending March 31, 2007, and in          first half of 2007. The facility closed in April 2007. The
excess of 2.5 Mt in the next fiscal year. The state-of-the-art   company indicated that it was primarily the extensive
preparation plant and facilities at Wolverine are the first of   export of very low-priced metal from China that is pre-
their kind built in Canada in more than 20 years. The plant      venting continued production at the world’s largest and
is designed to handle 3 Mt/y of high-quality coking coal.        most environmentally friendly magnesium plant. Norsk
The company uses the existing rail and port facilities           opened the plant in 1989 as part of its drive to target the
already in place for the northeast B.C. coalfields. The first    U.S. auto industry. The closure will be timed with the
shipments of Wolverine coal destined for customers in the        wind-up of a 10-year supply contract with General Motors.

In late November, Inco Limited (now CVRD Inco Limited)           focusing on “acid generation behaviour.” The workshop
and Sud-Chemie AG announced the formation of a new               was organized by the Comité Européen de Normalisation
joint-venture company called Alantum (50:50 ownership            (CEN), the European standardization committee. CEN is
between Sud-Chemie and Inco ECM GmbH, a wholly                   responding to the new European Directive on the manage-
owned indirect subsidiary of Inco), which will provide the       ment of waste from the extractive industries, which
automotive industry with materials to control catalytic          requires proper waste characterization as a basis for the
diesel emissions. Alantum will initially focus on making         development of waste management plans. There is a con-
diesel oxidation catalysts and diesel particulate filters for    cern that whatever Europe adopts may be adopted by other
European-built passenger cars and light trucks. Initial pro-     parts of the world, and there is therefore a need to ensure
duction is expected in 2008 from a new plant to be built in      that what they adopt is practical and effective.
Heufeld, Germany.
                                                                 The Concrete Group of the CANMET Materials Technol-
In early December, Aurizon Mines Ltd. announced the              ogy Laboratory (CANMET-MTL) successfully executed
pouring of its first gold dore bars at its 100%-owned Casa       the international development/technology transfer project
Berardi mine situated in the Abitibi region of northwestern      “Implementation of High-Volume Fly Ash Technology in
Quebec. Aurizon expects to achieve commercial produc-            India” funded by the Canadian Climate Change Develop-
tion at Casa Berardi in the first quarter of 2007, with pro-     ment Fund and administered by the Canadian International
duction gradually increasing from the initial planned rate of    Development Agency.
1600 t/d to 2200 t/d by the end of 2007. It is estimated that
Casa Berardi will produce approximately 185 000 oz of            The project’s goals were to strengthen India’s ability to
gold in 2007 at an estimated total cash cost of US$250/oz.       reduce greenhouse gas emissions and promote sustainable
Casa Berardi is currently forecast to produce 1 092 000 oz       development through high-volume fly ash concrete
of gold from 4.8 Mt of ore over the initial 6.2-year operat-     (HVFAC) technology in India that was developed by
ing plan, based on current mineral reserves. Additional          CANMET-MTL. The production of each tonne of portland
mineral resources comprise 2.7 Mt of indicated resources         cement, an essential component of concrete, results in
with an average grade of 5.1 g/t gold and 5.6 Mt of inferred     about one tonne of CO2. Fly ash, a by-product of coal
resources averaging 6.5 g/t gold.                                combustion in thermal power generation that accounts for
                                                                 over 70% of India’s power, causes environmental prob-
Also in early December, Teck Cominco Limited announced           lems. HVFAC addresses both of these problems by
that it had been selected by the Vancouver Organizing            reducing its portland cement content and incorporating
Committee for the 2010 Olympic and Paralympic Winter             more fly ash content. The project team, in cooperation
Games (VANOC) to supply gold, silver, and bronze for the         with several Indian partners, achieved significant results,
medals at the Vancouver 2010 Olympic and Paralympic              including many full-scale HVFAC constructions.
Winter Games. As well, it will work with VANOC and the
Royal Canadian Mint on the development and production            The research contributions of CANMET-MTL to the five-
of Olympic and Paralympic medals for 2010.                       year, $10 million Structural Cast Magnesium Development
                                                                 (SCMD) project was acknowledged by the U.S. Depart-
Government and Industry Initiatives                              ment of Energy (USDOE). The project, which involved
                                                                 34 participants from industry, academia, and government
The Government of Canada, provincial and territorial gov-        research organizations, developed technologies and manu-
ernments, the mineral industry, and others undertook a           facturing processes that led to the redesign of an aluminum
number of activities to promote and support Canada’s min-        engine cradle into a magnesium cradle. The cradle met
erals and metals industry and mining-related equipment           required vehicle specifications with a 35% weight savings.
and services sectors in 2006.                                    A special certificate from the USDOE was also awarded to
                                                                 CANMET-MTL for its overall contribution to the success
During 2006, the Minerals and Metals Sector of Natural           of the SCMD project.
Resources Canada (NRCan), and more generally NRCan,
participated in several national and international activities,   Dr. Dogan Paktunc of CANMET-MMSL was elected chair-
programs, and trade and investment conferences and               man of the International Mineralogical Association’s Com-
forums. This participation allowed the Sector to demon-          mission on Applied Mineralogy. The Association was
strate the innovation, technology and leadership of Can-         established in 1958 as a non-profit organization with the
ada’s minerals and metals sector on a global scale. Some         mission to further international cooperation in the mineral-
of these activities are highlighted below.                       ogical sciences and to promote wider awareness among
                                                                 international groups that it is the sole international organiz-
Dr. Bill Price of the CANMET Mining and Mineral                  ation promoting mineralogy.
Sciences Laboratories gave five presentations in Brussels
on the standards for the characterization of mine wastes,        CANMET-MMSL has developed a methodology to detect
                                                                 well failures and fluid leakage using seismic monitoring
                                                                                                      GENERAL REVIEW       1.15

techniques in collaboration with Imperial Oil Ltd. scien-           sentatives, environmental groups, and government agen-
tists. The success of this methodology led the company to           cies took place to help guide development of the policy,
adopt seismic monitoring for the detection of such failures,        which is consistent with policies in other jurisdictions in
promoting the environmentally friendly extraction of oil.           Canada.

In 2006, Géologie Québec (MRNF) carried out a number of          In late January, the Government of British Columbia
geological projects in various areas of Quebec, including        announced plans to invest an additional $2.3 million to
nine geoscientific inventories, ten geological studies and       expand training for youth from rural and Aboriginal com-
analyses, and several compilations and evaluations of min-       munities so they can pursue careers in the province’s min-
eral potential. Several geological inventories and studies       ing and mineral exploration industry. The new and
were carried out under the Copper Plan, the aim of which is      expanded programs promote partnerships among First
to foster the identification of new exploration targets and      Nations, communities, industry, and educational institu-
new mineral discoveries, and to supply the Horne smelter         tions. The new funding includes: $300 000 from the Min-
with copper concentrate. The results from these studies          istry of Energy, Mines and Petroleum Resources’ 2005/06
were released in November at the 2006 Québec Exploration         budget to continue the Northwest School of Exploration
conference, which was attended by some 1500 representa-          and Mining pilot program; $1 million to expand the pilot
tives of the exploration sector from all regions of Canada       program into a new province-wide Mining Education and
and other parts of the world.                                    Skills Development Program; and $1 million to create
                                                                 Prospector and Environmental Teams to provide hands-on
Also during 2006, Québec replaced the electronic register        experience for youth in prospecting and environmental
of mining titles with a new interactive, transactional, Web-     reclamation.
based mining title management interface called GESTIM
Plus. GESTIM Plus provides free, instant access 24 hours         Between February and April 2006, the Government of
a day to the public register of real and immovable mining        British Columbia carried out a series of job and career fairs
rights in Quebec, and allows users to consult the register       in communities in resource industry areas around the prov-
and to download maps and data.                                   ince. More than 20 of these fairs brought together explora-
                                                                 tion and mining companies, educational institutions, and
In mid-January, the Yukon government approved a Mine             employment agencies, together with prospective employees
Site Reclamation and Closure Policy for hard rock mines          and people interested in learning more about mining in
that became effective immediately. The policy lays out the       their region. The fairs provided information on job oppor-
Yukon government’s requirements for mining companies to          tunities and career options in the mineral exploration and
plan for and finance the costs of restoring land to its former   mining industries, and promoted the participation of First
state or other productive uses. As well, it provides guid-       Nations and rural communities. The fairs also promoted
ance to government agencies for implementing their regu-         awareness of the resource industry’s skills and training
latory responsibilities. Key components of the policy            requirements and of how mining benefits communities.
                                                                 In early February, the Boreal Prospectors Association was
• Mine operators are responsible for reclamation, care,          founded in Thunder Bay, Ontario. It was established to
  maintenance, and abandonment of the site;                      provide a forum in which members can identify and
                                                                 address the many geographical, governmental and cultural
• Every mine is required to have an approved reclamation         challenges facing the mineral industry in Ontario’s Far
  and closure plan that has been approved by the Yukon           North. It is a member of the Ontario Prospectors Associa-
  government before development proceeds;                        tion and is made up of independent prospectors, regional
                                                                 First Nations representatives, and industry representatives
• The reclamation and closure plan will be adjusted at           active in Northern Ontario. When the Association was
  regular intervals as new information is collected;             founded, there were 36 members, half of whom reside in
                                                                 northern communities.
• A Certificate of Closure will be issued when mine
  development or production is terminated and the Yukon          In early March, the Honourable Gary Lunn, Minister of
  government is satisfied that the mine operator has com-        Natural Resources, gave the keynote address to open the
  plied with all licence conditions; and                         annual Prospectors and Developers Association of Canada
                                                                 (PDAC) International Convention and Trade Show in
• The Yukon government will determine the form and               Toronto. The event attracts more than 12 000 delegates
  amount of security, to be provided by the mine operator,       from Canada and nearly 100 other countries.
  to cover the full amount of outstanding mine reclama-
  tion and closure liability. The amount will be periodic-       Also in early March, NRCan and the Ontario Ministry of
  ally adjusted in accordance with decreased or increased        Northern Development and Mines (MNDM) released a
  site liability. The government indicated that extensive        new video designed to provide Aboriginal communities
  consultation with First Nations, mining industry repre-        with a better understanding of the mining industry in

Northern Ontario. The video, entitled Our Community . . .        merly Falconbridge Limited), $5 million. The Government
Our Future: Mining and Aboriginal Communities,                   of Ontario has agreed to match any private contributions.
describes the mining sequence from government geological
surveying and mapping, through the entire exploration and        In early May, the Government of Canada in its 2006
mining process, to mine closure and site rehabilitation.         Budget extended the federal Investment Tax Credit for
Filmed in Northern Ontario, the video was produced by            Exploration (ITCE) from May 2, 2006, to March 31, 2007.
NRCan and MNDM with support from a number of First               The six-year-old program allows investors a 15% credit on
Nations communities and exploration and mining compan-           their flow-through-share investments in grassroots explora-
ies that are active in Ontario. The video is available in both   tion in Canada. The ITCE includes a provision that will
official languages and in three Aboriginal languages: Cree,      allow funds raised in 2007 to be spent on eligible explora-
Oji-Cree, and Ojibwa.                                            tion activity up to the end of 2008.

Also in early March, the Government of Ontario announced         As a result of this extension, continued eligibility for the
its new Mineral Development Strategy to enhance the min-         Manitoba Mineral Exploration Tax Credit was made effect-
eral sector’s global competitiveness. The strategy builds on     ive by the Government of Manitoba. Originally introduced
the provincial government’s current initiatives, programs        in the 2002 provincial budget, this 10% non-refundable
and services as it strives to ensure that the mineral sector     personal income tax credit would be in addition to the
continues to contribute at a high level to Ontario’s regional    ITCE in Manitoba.
and provincial economies. It outlines a series of key stra-
tegic objectives and action items that the government will       Also in early May, British Columbia’s only mining engin-
address in the implementation stage. The strategy proposes       eering program at the University of British Columbia
an engagement process that aims to promote positive min-         received a $7.5 million donation from Teck Cominco Lim-
eral sector relations with Aboriginal communities and sup-       ited, plus contributions from the company’s partners, to
ports the aspirations of Aboriginal communities by encour-       create the Norman B. Keevil Institute of Mining Engineer-
aging their enhanced participation in the benefits of            ing in honour of the company’s former President and CEO.
resource development and ensuring that communities are           The gift will provide support for infrastructure upgrades,
appropriately consulted. While a mineral development             faculty recruitment, and an enriched student experience for
strategy would apply to the entire province, the mineral         an expanded number of students, thereby enhancing the
sector is particularly important to the Northern Ontario         quality of education and leading-edge research. The Insti-
economy. The strategy is part of the government’s North-         tute will provide innovative solutions to real-world prob-
ern Prosperity Plan for building stronger northern commun-       lems and ensure environmental stewardship, sustainability,
ities. The plan has four pillars: Strengthening the North        community enhancement, and positive First Nations rela-
and its Communities, Listening to and Serving Northerners        tions. Teck Cominco secured contributions from a number
Better, Competing Globally, and Providing Opportunities          of its partners, including The Hallbauer Family Foundation,
for All.                                                         AMEC Inc., Silver Standard Resources Inc., Robert
                                                                 Quartermain, Steven G. Dean, and Dr. Klaus M. Zeitler.
In the mid-March Quebec Budget Speech, the Minister of
Finance announced that the head office of SOQUEM                 In early June, the Government of British Columbia and the
(Société québécoise d’exploration minière) would be              Blueberry River First Nations signed the first-of-its-kind
relocating from Québec City to Val-d’Or. The move is             Economic Benefits Agreement aimed at strengthening land
intended to put the corporation closer to where the bulk of      use certainty in the province’s northeast region with respect
exploration activity takes place. The government also allo-      to the continued growth of the energy, mineral, and petrol-
cated $3 million a year over three years for SOQUEM’s            eum resource sectors in the area. The agreement provides
exploration projects.                                            for an initial payment of $2.37 million, followed by pay-
                                                                 ments totaling not more than $3.214 million per year for
In late March, the Government of Ontario announced fund-         15 years. After the initial payment, subsequent payments
ing of $10 million to Laurentian University to launch the        will be linked to the level of activity and revenue from
Centre for Excellence in Mining Innovation. In 2004, Lau-        resource development in the northeast region. The funds
rentian adopted a mining vision to become a national centre      provided to the Blueberry River First Nations will be paid
of excellence in mining innovation, which was followed in        into a trust whose sole beneficiary is the Blueberry River
December 2005 by the university’s decision to create such        First Nations. This benefits agreement will be in effect
a centre at its Sudbury campus. The Centre’s research pri-       until March 31, 2020, pending the successful negotiation of
orities, developed with industry input, will focus on mining     other corresponding matters such as the role for the Blue-
exploration, deep mining research, integrated mine process       berry River First Nations in land and resource
engineering, telerobotics and automation, and environment        management.
and reclamation. Subsequently, additional funding has
come from Inco Limited (now CVRD Inco Limited),                  In mid-June, the Honourable Gary Lunn announced a five-
$5 million in-cash and in-kind; the City of Greater              year, $2.4 million project to provide access to new, high-
Sudbury, $50 000 over three years; and Xstrata Nickel (for-      quality satellite images of Canada. These improved and
                                                                                                    GENERAL REVIEW       1.17

standardized images will be available to all Canadians for     Territories. The GNWT has joined forces with Arslanian
free over the Internet. The images will support government     Cutting Works, Polar Diamond Group, Aurora College, the
decision- and policy-makers in the fields of public safety,    City of Yellowknife, Northwest Territories Tourism, and
health, and the environment, as well as northern and           other partners to establish the club.
Aboriginal communities. As well, the investment will
deliver more up-to-date and higher-resolution images for        In late August, mines ministers from the Government of
our energy, mining, and forestry industries.                   Canada, the provinces, and the territories met for the
                                                               63rd annual Mines Ministers’ Conference and agreed to a
In late June, the World Gold Council (WGC) announced           renewed mining Action Plan for Canada. The federal-
that Agnico-Eagle Mines Limited, Cambior Inc., Coeur           provincial-territorial Action Plan will guide intergovern-
D’Alene Mines Corporation, Eldorado Gold Corporation,          mental initiatives that are critical to the long-term future of
Goldcorp Inc., IAMGOLD Corporation, and Kinross Gold           the industry. The goals of the agreement are to strengthen
Corporation had joined the WGC. As a result, the WGC           the competitiveness of the minerals and metals industry and
represents 24 companies and about 38% of total world gold      to deliver benefits to mining communities across the coun-
production. Founded in 1987, the aim of the WGC is to          try. The ministers pointed to the importance of focussing
stimulate and maximize the demand for and holding of           on clear priorities such as advancing the Cooperative Geo-
gold by consumers, investors, industry, and the official       logical Mapping Strategies and improving the regulatory
sector.                                                        process. The ministers also agreed that work be undertaken
                                                               to improve the efficiency of the regulatory process and to
In late July, the Government of British Columbia and the       add specific timelines for project approvals, while recog-
Upper Similkameen Indian Band (USIB) signed a consulta-        nizing that environmental protection must continue to be
tion agreement which ensures that consultations are held       pursued in a rigorous manner. The annual Mines Ministers’
before any mining activity is done in the band’s traditional   Conference allows industry representatives, stakeholders,
territory. The Mining and Minerals Protocol Agreement          and governments to continue dialogue about the minerals
establishes an effective means for communication and           and metals industry in Canada.
information-sharing between the Province and the band,
and ensures that mining development will be done in an         Also at the Mines Ministers’ Conference in Whitehorse,
environmentally and culturally sustainable manner. It also     Yukon, a new information kit was released to help Aborig-
provides effective regulation of mineral resource develop-     inal people make more-informed decisions about mining
ment and allows the Province to assist the band in             and take advantage of the opportunities it offers for their
developing the capacity to participate in, and benefit from,   communities. The information kit was the product of a
mining activities within its territory. The USIB has about     partnership among the Prospectors and Developers Associ-
100 members and has worked closely with government,            ation of Canada, The Mining Association of Canada, the
industry, and other First Nations to develop capacity in the   Canadian Aboriginal Minerals Association, and the Gov-
areas of mining, geographic information systems, forestry,     ernment of Canada (Natural Resources Canada, and Indian
tourism, and archaeological knowledge. The band has a          and Northern Affairs Canada). This project reaffirms the
long history extracting, utilizing, and trading rocks and      commitment of the partners to work with Aboriginal com-
minerals in the Similkameen area and is a leader in the        munities to increase the contribution of the minerals and
interpretation of the cultural and contemporary use of         metals industry to the well-being of Aboriginal people.
minerals.                                                      The information kit is available in both English and French,
                                                               and will be distributed to interested Aboriginal commun-
In mid-August, the Government of the Northwest Territor-       ities across Canada. It is also available on each of the part-
ies (GNWT) announced a new retailers club that would           ners’ web sites.
provide key North American retailers with exclusive tools,
tips and techniques to promote their sales of GOVERN-          In late September, the Government of Manitoba announced
MENT CERTIFIED CANADIAN DIAMONDS™. The                         that the Province had established a $70 million provincial
RARE IN NATURE™ Diamond Retailers Club is the                  account for orphaned and abandoned mines. This included
second phase of the RARE IN NATURE™ campaign                   a new agreement between the province and Viridian Inc. to
launched in 2005 to raise consumer awareness and interest      share the rehabilitation cost of the East Tailings Manage-
in GOVERNMENT CERTIFIED CANADIAN DIA-                          ment Area near the town of Lynn Lake. Under the agree-
MONDS™ and to support the growth of the N.W.T.’s sec-          ment, the parties will complete a plan for rehabilitation of
ondary diamond industry. Features of the new club will         the area by May 2007. In 2006, the province was spending
include an interactive on-line news service covering events    $4 million for rehabilitation projects at Lynn Lake, Ruttan,
and developments in the N.W.T. diamond industry, access        Sherridon, and Snow Lake, including environmental mon-
to an exclusive gallery of northern images, point-of-sale      itoring, dike repair, demolition and clean-up, site revegeta-
display materials, and the inside track to the background      tion, and preparation of long-term rehabilitation plans. The
and knowledgeable insight of diamond-marketing profes-         aim of the mine-site rehabilitation is to meaningfully
sionals. Designation as club members will be recognized        address environmental, health and safety risks and return
with a certificate signed by the Premier of the Northwest      the site as closely as possible to its original condition. By

the end of the year, all orphaned and abandoned mine sites       coinage. Gold bullion is also important as a global invest-
were to be inspected and sites requiring further rehabilita-     ment/demand product.
tion were to be identified.
                                                                 In 2006, gold was Canada’s fourth leading metallic mineral
In late October, a workshop of the National Orphaned/            as the value of gold production increased by 8.4% to
Abandoned Mines Initiative (NOAMI) was held in Winni-            $2.2 billion. However, mine production decreased by
peg, Manitoba, to share best practices on managing               13.5% to 103 402 kg. Exports rose by 28.9% to
orphaned and abandoned mines. Representatives included           $5.6 billion.
provincial, territorial and federal government officials, non-
governmental organizations, Aboriginal communities, min-         Copper
ing industry officials, and others. Orphaned or abandoned
mines are mines for which the owner either cannot be             In global terms in 2006, Canada was ranked as the eighth
found or is financially unable or unwilling to carry out site    leading producer of copper behind Chile, the United States,
rehabilitation. Many of these sites were developed decades       Peru, China, Australia, Indonesia, and Russia. Canada-
ago, before environmental impacts were fully understood          based Falconbridge Limited (which was acquired by
and modern operating standards were developed. Some of           Xstrata plc in 2006), Hudson Bay Mining and Smelting Co.
the sites pose environmental, health, safety, and economic       Limited, and Inco Limited (which was taken over by
risks. Orphaned and abandoned mines exist within all min-        CVRD in 2006), are major world producers of copper.
ing jurisdictions in Canada. The two-day workshop                Copper is mined in Newfoundland and Labrador, New
addressed key priorities, including best practices for mine-     Brunswick, Quebec, Ontario, Manitoba, Saskatchewan, and
site assessment, monitoring and rehabilitation, community        British Columbia, while primary smelters are located in
and Aboriginal consultation, partnership approaches, and         Quebec, Ontario and Manitoba, with refineries in Quebec,
funding options.                                                 Ontario, and British Columbia. Copper’s properties, espe-
                                                                 cially its high electrical and thermal conductivity, good ten-
In early November, the formation of the International Plant      sile strength, relatively high melting point, and resistance to
Nutrition Institute (IPNI) was announced and it integrates       corrosion make it and its alloys attractive for electrical
the operations of the Potash & Phosphate Institute and the       transmission, water tubing, castings, and heat exchangers.
Potash & Phosphate Institute of Canada into its organiza-
tion. IPNI is a new, not-for-profit, scientific organization     In 2006, the value of copper production in Canada
dedicated to the responsible management of plant nutrients.      increased by 78.8% to $4.6 billion, with production up by
IPNI founding members include Agrium Inc., PotashCorp,           3.1% to 595 100 t. Based on the value of production, cop-
Mosaic, Saskferco, Simplot, Groupe OCP, Arab Potash              per was Canada’s second leading metal in 2006. Exports
Company, Belarusian Potash Company, Bunge Fertilzantes           increased by 60.9% to $6.3 billion.
S.A., CF Industries Holdings Inc., Intrepid Mining, LLC,
KK+S KALI GmbH, Sinochem Hong Kong Ltd., Spur                    Zinc
Ventures Inc., SQM, Terra Industries Inc,. and Uralkali.
The companies involved in the new organization are basic         Canada was the world’s fifth largest producer of zinc in
producers of nitrogen, phosphate, potash, and sulphur for        2006, trailing China, Australia, Peru, and the United States.
agricultural use.                                                Canada-based Teck Cominco Ltd. and Falconbridge Lim-
                                                                 ited, now Xstrata Nickel, are two of the largest zinc produ-
                                                                 cers in the world. In 2006, zinc was mined in New Bruns-
PROFILES OF THE LEADING MINERALS                                 wick, Quebec, Ontario, Manitoba, Saskatchewan, and
PRODUCED IN CANADA                                               British Columbia, with metallurgical plants located in Que-
                                                                 bec, Ontario, Manitoba, and British Columbia. The main
Gold                                                             uses of zinc are as a coating (galvanizing) for steel to pro-
                                                                 tect it from corrosion, the manufacture of brass and bronze,
Canada has a long history of being one of the world’s lead-      and die-casting.
ing producers of gold. In 2006, Canada was the seventh
largest global gold producer, trailing South Africa, China,      In 2006, the value of zinc production rose by 101.5% to
Australia, the United States, Peru, and Russia. Canada-          $2.1 billion, even though production fell by 4.0% to
based Barrick Inc. and Goldcorp Inc. are two of the top          594 200 t. Zinc was Canada’s fifth leading metal based on
global gold-producing companies. In 2006, gold mining            value of production in 2006. Exports rose by a dramatic
was carried out in all provinces and territories with the        85.5% to $2.3 billion.
exception of Newfoundland and Labrador, Prince Edward
Island, Nova Scotia, the Northwest Territories, and Nuna-        Nickel
vut. Gold refineries are located in Quebec and Ontario.
The main use for gold is in jewellery manufacturing, with        Canada is the world’s second leading nickel producer
other important uses including electronics, dentistry, and       behind Russia. In 2006, the next leading producers were
                                                                                                    GENERAL REVIEW       1.19

Australia, Indonesia, and New Caledonia. Globally, the          by 22.4%% to 9781 t. Exports increased by 23.9% to reach
industry is relatively small and is dominated by several        $2.2 billion.
large producers, including Canada-based Inco Limited
(now CVRD Inco Limited) and Falconbridge Limited (now           Potash
Xstrata Nickel). In 2006, nickel was mined in the prov-
inces of Newfoundland and Labrador, Quebec, Ontario, and        Potash refers to a group of potassium-bearing minerals and
Manitoba, with smelters in Ontario and Manitoba, and            chemicals. The dominant potash product is potassium
refineries in Ontario and Alberta. Nickel’s resistance to       chloride, a naturally occurring pink, salty mineral for which
corrosion, high strength, pleasing appearance, and suitabil-    Canada is the world’s leading producer and exporter. Inter-
ity make it useful in many applications. Major markets          nationally in 2005, Canadian output accounted for 33% of
include stainless steels (which use about 65% of nickel pro-    world production, followed by Germany, Russia, Belarus,
duction), nickel and copper-based alloys, electroplating,       and Israel. In Canada in 2006, potash was produced in Sas-
alloy steels, and foundry products.                             katchewan and New Brunswick, with the Potash Corpora-
                                                                tion of Saskatchewan Inc. being the largest potash producer
In 2006, the value of Canadian nickel production rose by        and exporter in the world. Fertilizer use consumes over
75.9% to $6.2 billion with production increasing by 17.0%       90% of the output. Other uses include detergents, ceram-
to 225 700 t. Based on its value of production, nickel was      ics, chemicals, and pharmaceuticals.
Canada’s leading metal in 2006, as well as Canada’s num-
ber one mineral commodity. Exports rose by 42.2% to             The value of Canadian production declined by 9.2% in
$5.9 billion.                                                   2006 to $2.2 billion as production fell by 15.9% to
                                                                8 528 000 t. Potash was again Canada’s leading nonmetal-
Iron Ore                                                        lic mineral in 2006 by value. Exports fell by 12.0% to
                                                                $2.4 billion.
Canada is a major producer of iron ore, with North Amer-
ican steel producers being the major users of Canadian-         Diamonds
mined iron ore. In global terms, Canada ranked ninth in
production in 2006 behind China, Brazil, Australia, India,      Canada became a diamond producer in 1998 with the
Russia, Ukraine, the United States, and South Africa. The       start-up of the Ekati mine (now owned 80% by BHP Billi-
major Canada-based producers of iron ore are the Iron Ore       ton Plc) in the Northwest Territories. In 2003, Canada’s
Company of Canada, Quebec Cartier Mining Company,               second diamond mine began production. The Diavik mine,
and Wabash Mines. Production takes place in Newfound-           which is a joint venture of Diavik Diamond Mines Inc.
land and Labrador, Quebec, and British Columbia. Iron ore       (DDMI) (60%) and Aber Diamond Mines Ltd. (40%), is
is upgraded in Canada for steelmaking use as pellets and        also located in the Northwest Territories. In 2006, Can-
concentrates.                                                   ada’s third diamond mine, Tahera Diamond Corporation’s
                                                                Jericho mine, began operations in Nunavut. Diamond cut-
In 2006, the value of Canadian production rose by 10.5% to      ting and polishing facilities operate in Canada, processing a
$2.6 billion as production rose by 12.2% to 34.1 Mt. Iron       portion of Canadian production. Besides jewellery manu-
ore was Canada’s third leading metallic mineral in terms of     facturing, tools and equipment manufacturing are important
value in 2006. Exports increased by 17.4% to $1.9 billion.      markets for diamonds. On a global scale, it is estimated
                                                                that Canada ranked third in 2006 in terms of the value of
Uranium                                                         diamond production behind Botswana and Russia.

Canada is the world’s largest producer and exporter of          In 2006, the value of diamond production in Canada fell by
uranium, typically delivering over 85% of its annual pro-       9.7% to $1.6 billion as production improved by 7.2% to
duction to customers around the world. In 2005, Canada          13.2 million ct. Based on value, diamonds were Canada’s
accounted for 27.8% of global uranium production, fol-          third leading nonmetallic mineral in 2006 after potash and
lowed by Australia, Kazakhstan, Russia, and Namibia. All        cement. Exports declined to $1.8 billion, a decrease of
Canadian uranium production takes place in Saskatchewan,        3.2%.
and Saskatoon-based Cameco Corporation is the world’s
largest producer. Cameco also operates Canada’s only            Aluminum
refinery and conversion facilities in Ontario, and is a part-
ner in the Bruce nuclear power station in Ontario. Can-         Canada has been a leading producer of aluminum for some
adian uranium is used almost exclusively as fuel for gener-     three-quarters of a century with smelter production based
ating electricity in nuclear power plants, although a very      on hydro-electric power. Aluminum is produced in two
small amount may be used to produce isotopes for                provinces, Quebec (90%) and British Columbia (10%),
applications in nuclear medicine.                               from imported alumina, alumina extracted from imported
                                                                bauxite, and recycled materials. Because of its light and
In 2006, the value of production from mines in Canada           rust-resistant properties, aluminum is used extensively in
increased by 26.4% to $1.4 billion, with production falling

transportation, packaging, and building and construction        growth rate in 2007 and a slight improvement to 2-2.4% in
applications. Globally, Canada was the third leading pro-       2008.
ducer of primary aluminum in 2005, trailing China and
Russia and ahead of the United States and Australia. The        The Canadian economy, as measured by real GDP at mar-
large Canadian company, Alcan Inc., is the world’s second       ket prices in chained (2002) dollars, rose at an annualized
largest producer.                                               rate of 3.4% in the second quarter of 2007, following a
                                                                3.9% increase in the first. The strength was widespread as
Production of Canadian primary aluminum increased 5.2%          consumer and investment expenditures accelerated from
to 3040 Mt in 2006, compared with 2890 Mt in 2005. The          the first quarter. Despite a substantial appreciation of the
value of Canadian primary aluminum production in 2006           Canadian dollar relative to the U.S. dollar, exports also
was estimated at $8.8 billion, up from $6.65 billion in         increased. Conversely, spurred by the jump in the Can-
2005. Exports increased by 27.2% to $12.4 billion.              adian dollar and strong domestic demand, the value of
                                                                imports rose by 1.6% compared to the first quarter. For the
Because aluminum in Canada is initially produced entirely       year 2007, growth may be expected to decline to about
from imported materials, its value is not reflected in the      2.5% as the strong Canadian dollar and lower U.S. demand
statistics on “mineral production” that appear elsewhere in     could cut into Canada’s export market. Strong domestic
this chapter. Its value is, however, reflected in the GDP of    consumer demand will partially offset the somewhat
the mineral industry, where its production and processing       weaker trade picture, but export-sensitive sectors will
are major components of Stages 2 and 3.                         remain vulnerable, resulting in growth slowing in 2008 to
                                                                about 2.2%.

OUTLOOK AND TRENDS FOR THE                                      In spite of core inflation running near 2.5%, above the
                                                                Bank of Canada’s target overnight rate, the Bank remained
CANADIAN MINERALS INDUSTRY                                      on hold at its September Fixed Announcement Date, pri-
                                                                marily to provide a safety net related to financial market
Global economic growth is expected to decline in 2007 to        volatility caused by concern about exposure to U.S. sub-
around 5% from the estimated 5.3% rate recorded in 2006.        prime mortgages. An increase later in the year to 4.75%
This is partly the result of an anticipated slowdown in the     from 4.50% is possible as the Canadian economy seems
U.S. economy, coupled with rising interest rates in the         well placed to weather the effects of the sub-prime situation
industrial world. For 2008, a slight decline to just under      and also to help provide some inflation relief. However,
5% can be expected.                                             with the Canadian dollar reaching and surpassing par with
                                                                the U.S. dollar in September 2007, and with the 0.5% cut in
Although real GDP growth in the United States got off to a      U.S. interest rates, interest rates in Canada are likely to
slow start in the first quarter of 2007 (0.6%), consumer        remain steady, at least in the short term. The Canadian dol-
spending continued to rise, surpassing 4% for the second        lar should remain at about par with the U.S. dollar for the
quarter in a row. Among other factors, declining residential    rest of 2007 and into 2008, but settle back to perhaps the
investment put a damper on first-quarter growth. Solid          mid-90s as resource prices moderate and the U.S. dollar
wage growth has supported consumer spending up to now,          strengthens as the U.S. economy picks up.
but the decline in housing wealth is expected to have a
negative impact on near-term spending. Despite a strong         Growth in the Chinese economy is expected to maintain its
rebound in the second quarter to an annualized estimated        hot pace of at least 10.0% in both 2007 and 2008, despite
growth rate of 4.0%, the expected decline in consumer           measures aimed at bringing the growth rate down. The
spending will likely produce an annual increase in real         rapid growth expected in China (and also India, where
GDP of about 2%.                                                growth is likely to reach 8% or higher in both 2007 and
                                                                2008) will provide a solid base for prices for metals and
The acceleration in real GDP growth in the second quarter       other commodities. Conversely, as a result of fiscal
primarily reflected a downturn in imports, upturns in fed-      tightening, gradually rising interest rates, and the spillover
eral government spending and in private inventory invest-       effects of U.S. and Western Europe economic cooling, the
ment, accelerations in exports and in non-residential struc-    Japanese economy is expected to slow to under 2% in both
tures, and a smaller decrease in residential fixed investment   2007 and 2008.
that were partly offset by a notable deceleration in personal
consumption expenditures. In September, the U.S. Federal        The outlook for other Asia-Pacific regions is generally
Reserve cut its key interest rate to 4.75% from 5.25% in an     favourable with some interest rate relief, evident after a
attempt to offset the negative effects of the sub-prime mort-   period of tightening, designed to stimulate a more domes-
gage lending situation. Further reductions are expected in      tically oriented economy.
the near future.
                                                                In Western Europe, currency appreciation, rising interest
Business investment and strength in exports will likely help    rates, and more restrictive fiscal policies are likely to lead
offset the decline in consumer spending, resulting in a 2%      to a decline in the economic growth of the region from just
                                                                                                    GENERAL REVIEW      1.21

under 3% in 2006 to about 2.5% in 2007 and 2% in 2008.          average of about US$1.50/lb. As lead is often produced in
However, inflation is expected to be relatively tame            conjunction with zinc, the increased zinc production will
through 2008 as domestic spending growth slows and com-         result in an increase in the supply of lead, thereby likely
modity prices possibly ease. This should allow some             producing a lead surplus in 2008 and an average price of
reduction in key interest rates. Lower rates would also         less than US$1.00/lb.
have the effect of taking some pressure off the euro, which
has been appreciating strongly against the U.S. dollar.         As for gold, it has traded above US$600/oz throughout the
                                                                first nine months of 2007, broached the US$700/oz mark in
The major Latin American economies’ fiscal, monetary            September, and was over US$700/oz at the end of the third
and banking sectors have improved markedly, which will          quarter. Most analysts expect the price to remain above
help them weather the fallout from the sub-prime mortgage       US$700/oz. Investor interest is driving the gold market.
crisis in the United States. Some impact is likely from the     Gold tends to move in the opposite direction with respect
U.S. slowdown; however, strong domestic demand and a            to the U.S. dollar, so the current weakness, and expecta-
shifting of some exports to other foreign markets should        tions of further dollar weakness, have supported the price.
allow the core group of Latin American countries to main-       The September move by the U.S. Federal Reserve to lower
tain growth rates above those of 2006.                          interest rates put additional pressure on the dollar. Gold
                                                                is also viewed as a “safe haven” in periods of global ten-
Global minerals and metals demand will be very much             sions and financial turmoil, both of which were in evidence
affected by the ongoing strong economic activity in China       as the year progressed. In addition, jewellery demand is
and, increasingly, India, and also by the expected slow-        strong, helping to further underpin the price.
down in the growth of the U.S. economy.
                                                                Of the nonmetals, potash prices at the Port of Vancouver
Nickel prices rose steadily through 2006 and the first half     reached a record high US$209/t in August 2007. As sup-
of 2007, reaching a monthly average high of US$23.67/lb         ply is tight and demand is robust due to solid global farm
in May. The price eased during the third quarter to about       income growth, higher prices may be expected.
US$12.50/lb in September. For 2007, the price of nickel
should still average well above US$17/lb, higher than the       In general, 2007 was a very good year for the Canadian
2006 average of US$11.00/lb. A Standard & Poors Rating          mining industry, as many mineral and metal product prices
Services report stated that “fundamental supply constraints     reached record or near-record levels. While some modera-
remain positive for nickel and will limit downward price        tion in prices in 2008 may be expected, prices in most cases
pressure” and “. . . the nickel market will not likely risk     are likely to remain above historical averages. The prices
oversupply until 2010.” With that in mind, although the         experienced in 2007 (and that have generally been increas-
average will very likely be below the record high of 2007,      ing for several years) have spurred investment in explora-
the price could still average in the US$13-$14/lb range,        tion and deposit appraisal to levels not seen since 1987-88.
well above the long-term average of about US$3.50/lb.           This level of activity is expected to be maintained.

Copper, which has been trading at over US$2/lb since
December 2005, reached a monthly high record of                 Notes: (1) For definitions and valuation of mineral pro-
US$3.65/lb in May 2006. The price then eased until the          duction, shipments and trade, please refer to Chapter 65.
beginning of 2007. An upward trend brought the price to a       (2) Information in this review for 2006 statistics was cur-
monthly average of US$3.62/lb in July 2007 as the market        rent as of June 2007; outlook material was current as of
reacted to several supply disruptions. As some of these dis-    September 2007. (3) Sources for outlook material include
ruptions were resolved, the price eased during the remain-      the Bank of Canada, Conference Board of Canada, vari-
der of the third quarter to US$3.40-$3.50/lb. For 2007, the     ous issues of Platts Metals Week; Royal Bank of Canada
copper price could average about US$3.20-$3.25/lb, com-         (RBC); Scotiabank; Statistics Canada; and TDBank.
pared to US$3.05/lb in 2006. With fundamentals expected         (4) This and other reviews, including previous editions,
to remain favourable over the medium term, prices should        are available on the Internet at
remain strong, although at lower levels than those seen in      cmy/2006CMY_e.htm.

The rise in the price of lead has been the most spectacular                         NOTE TO READERS
of the base metals. Starting the year at US$0.76/lb, the
price rose steadily to a September average of US$1.46/lb.       The intent of this document is to provide general infor-
Supply interruptions and low stock levels contributed to        mation and to elicit discussion. It is not intended as a
this rise. The nine-month average price was US$1.07/lb.         reference, guide or suggestion to be used in trading,
                                                                investment, or other commercial activities. The author
For the year, the average will likely be about the same.        and Natural Resources Canada make no warranty of
                                                                any kind with respect to the content and accept no
As new zinc supply starts to replenish zinc stocks, the price   liability, either incidental, consequential, financial or
of zinc is expected to moderate from an expected 2007           otherwise, arising from the use of this document.

                                                           Volume               Change             Value               Change
                                                       2005 (r) 2006 (p)      2006/2005       2005 (r) 2006 (p)      2006/2005

                                                      (000 tonnes except             (%)         ($ millions)                 (%)
                                                         where noted)


       Nickel                                              193        226           17.0       3510.3      6176.4          75.9
       Copper                                              577        595            3.1       2572.5      4600.1          78.8
       Iron ore                                          30387      34094           12.2       2339.5      2584.2          10.5
       Gold                                 kg          119549     103402          -13.5       2071.8      2246.8           8.4
       Zinc                                                619        594           -4.0       1035.9      2087.3         101.5
       Uranium                              tU           12597       9781          -22.4       1131.6      1430.5          26.4
       Platinum group                       kg           22709      22878            0.7        405.4       492.3          21.4
       Silver                                t            1063        968           -8.9        304.0       398.8          31.2
       Lead                                                 73         82           11.9         86.1       116.6          35.4
       Cobalt                                t            2391       2793           16.8        102.0       113.2          11.0
       Molybdenum                            t            7667       7042           -8.2            x           x             x


       Potash (K2O)                                      10140       8528          -15.9       2437.5      2212.1          -9.2
       Cement                                            14656      14571           -0.6       1661.3      1702.9           2.5
       Diamonds                         000 carats       12314      13206            7.2       1762.1      1590.7          -9.7
       Stone                                            141275     140840           -0.3       1215.0      1267.1           4.3
       Sand and gravel                                  243440     236505           -2.8       1180.3      1189.2           0.8
       Salt                                              13463      13338           -0.9        432.0       439.1           1.6
       Lime                                               2289       2211           -3.4        261.8       271.7           3.8
       Clay products                                        ..         ..             ..        232.7       230.9          -0.8
       Peat                                               1304       1245           -4.5        219.1       211.2          -3.6
       Sulphur, elemental                                 7757       8296            6.9        234.2       158.4         -32.4
       Gypsum                                             8570       9072            5.9        113.9       123.9           8.8
       Nepheline syenite                                   745        719           -3.5         63.3        66.5           5.1
       Quartz (silica)                                    1807       1893            4.8         59.7        64.8           8.6
       Sulphur, in smelter gas                             653        693            6.1         36.0        38.3           6.3
       Soapstone, talc, pyrophyllite                        70         68           -2.9         26.2        22.3         -15.0
       Chrysotile (asbestos)                                 x          x              x            x           x             x
       Coal                                              65345      62987           -3.6       2329.0      2205.1          -5.3

       Sources: Natural Resources Canada; Statistics Canada, Canada's Mineral Production, Preliminary Estimates , catalogue
       no. 26-202-XIB.
       . . Not available; (p) Preliminary; (r) Revised; (x) Confidential.
       Notes: Numbers have been rounded. Percent changes are based on unrounded data.
                                                                                          GENERAL REVIEW   1.23

                                                2002        2003          2004         2005        2006

                                                                    ($ millions)


Domestic exports                            96 368.6    105 479.2    121 753.2     145 483.5   156 136.2
Total exports                               98 626.5    107 688.4    123 831.0     148 290.0   159 806.2
Imports                                     65 182.1     65 373.8     77 035.7      90 924.4    97 752.6
Balance of trade                            33 444.5     42 314.7     46 795.3      57 365.6    62 053.6


Domestic exports                            47 227.4     44 802.8     52 856.0      58 646.3    68 480.4
Total exports                               48 583.7     46 211.0     54 611.2      60 774.9    71 228.5
Imports                                     47 140.7     43 805.1     51 028.0      55 178.6    60 461.6
Balance of trade                             1 443.0      2 406.0      3 583.2       5 596.4    10 766.9


Domestic exports                            49 069.2     46 489.7     54 765.4      62 079.9    71 911.9
Total exports                               50 443.8     47 901.4     56 552.4      64 257.4    74 665.7
Imports                                     48 428.9     44 940.5     52 337.9      56 714.4    61 986.2
Balance of trade                             2 014.9      2 961.0      4 214.5       7 543.0    12 679.6


Domestic exports                           365 294.4    354 302.8    385 522.6     408 420.6   411 282.5
Total exports                              396 381.3    381 071.4    412 294.4     436 225.9   440 156.6
Imports                                    348 956.8    336 141.3    355 799.1     380 809.6   396 530.7
Balance of trade                            47 424.6     44 930.1     56 495.3      55 416.2    43 625.9

Sources: Natural Resources Canada; Statistics Canada.

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