Market uncertainty creates major challenges for critical mineral exploration

Many in the mining world are used to the cyclical nature of the industry. 

But prospectors and the smaller junior exploration companies that carry out most of the work to find critical minerals are particularly vulnerable to the whims of the market. 

Unlike their larger counterparts, most juniors cannot rely on production revenues and depend entirely on the stock market and investors for the money they need to advance projects. 

These companies cannot wait for more favourable market conditions before making a move as they must do a certain amount of exploration work every year to hold on to their claims.

This is why the current economic slowdown is creating major obstacles for critical mineral exploration. 

Midex Resources, for example, has poured a lot of money in five northwestern Ontario lithium projects in the past years, but the latest market slump means the company has to find other ways to stay afloat if it wants to continue its work. 

It was planning on listing its shares on the stock exchange to raise money until lithium prices started dropping. 

"It's all about timing," says president and CEO David Jamieson. "If we had gone through that process last year, we wouldn't have had any problems because lithium was red hot then."

Jamieson says that his company has had to cut back on salaries and expenses while it waits for the market to bounce back. 

But in the meantime, bills keep coming, and Midex Resources recently had to sell one of its projects to make ends meet. 

"We've got people coming over from Australia and they will put money into our company, but they would rather take one of our properties or take us over," he said. 

Jamieson says that if the market conditions don't improve, he might have to work for free for some time, or sell the company. 

He worries that his company could ultimately end up in the hands of a foreign investor. "We should be able to fund our own resources here." 

Many companies are at the 'end of their rope', says consultant

Tania Poehlman, a lands management specialist and the president of In Good Standing, a mining and exploration consultancy firm, has heard many stories like that of Midex Resources recently.

"The money is just not there," she said. "We've got a number of really good promising projects in this province and there's just no funding to continue to move them forward." 

Poehlman adds that many of her clients are "at the end of their rope" as they struggle to raise the funds they need to hold on to their claims. 

She says many of them will have to let go of their properties. 

According to her, many international companies are coming in to fill the void, which she believes may have long term implications for people in northern communities.

"It's unfortunate that people from Ontario have to give up their livelihood to people coming from outside Canada," said Poehlman. 

She says the provincial government has been making efforts to provide more support for junior exploration companies, but notes it will take time before the results of these policy initiatives will be seen.

"And in the meantime, the markets just aren't that forgiving."

According to preliminary statistics from Natural Resources Canada, exploration expenditures in Ontario declined in 2023. 

Some $900 million was spent in the province this year, versus almost a billion dollars last year.