Introduction

The obvious question that an investor should ask is: if Newfoundland and Labrador possess such an abundance of mineral wealth, why has it not been explored for and developed until now?

The two principal reasons for the neglect of the mining industry were the system of land tenure that prevailed in Newfoundland until recently and the abundance of other natural resources that were highly profitable and more readily accessible: namely fishing and logging.

The paradox of the economic development of the Province of Newfoundland and Labrador is that while it is the oldest of England’s colonies in North America, its interior remained inaccessible and virtually unexplored until the early twentieth century.

The Island of Newfoundland was “discovered” and claimed as a possession of England by John Cabot in 1497 on behalf of King Henry VII of England. In August 1583, Sir Humphrey Gilbert landed in Newfoundland and founded the City of St John’s. At that time, by the authority of Queen Elizabeth I, he formally took possession of the entire Island of Newfoundland on behalf of England.

St. John’s, Newfoundland, remains the second oldest continuously occupied European settlement in North America. (St. Augustine, Florida, is the oldest. It was founded in 1565 by the Spanish).

Fishing

For the next three hundred years the economy of Newfoundland was focused almost exclusively on the fishing industry. The colony was located on the western perimeter of what was the most prolific fishing grounds in the world, the Grand Banks. Investment capital from Europe was profitably focused on the development and expansion of fishing fleets and the fishing ports needed to support them. Since the climate and poor soil conditions did not lend themselves to agricultural development, there was no incentive for investors to look inland for opportunity and profit. Consequently, the interior of both Newfoundland and Labrador remained relatively unexplored and inaccessible until the late 19^th century. At the turn of the 20^th century, 95 per cent of Newfoundland’s exports came from the fishing industry.

Logging and the Concession System

By the 1860’s the British colonial administration began to consider ways to induce investors to develop the resources of the colony’s interior regions. Their priority was the construction of a railway system that would provide access to the interior. At that time, railroads were the primary form of land transportation over long distances.

The program adopted was the granting of large land concessions to a select group of private companies or wealthy families. Legal ownership of all surface and mineral resources were granted for periods of 99 years. The “Concession System” assumed that the new owners would invest their capital in the development of transportation infrastructure in order to explore and develop the forest and mineral resources that they now possessed.

By the 1880s the growth of the fishing industry in Newfoundland had peaked and there was no longer a growing need for labour. The priority of the colonial administration was the need for employment for new entrants to the labour force. The logging and pulp and paper industry became the next major source of employment in Newfoundland and Labrador.

Mineral Policy and Mineral Exploration

Pre-Confederation

The recipients of land concessions responded as hoped.

They invested their capital in the development of a major forestry industry. A railway system was developed that opened up the forests of Newfoundland’s interior to a burgeoning logging industry. An extensive system of logging roads to transport logs to the railroads was constructed and well maintained. Sawmills, pulp and paper plants and port facilities needed to accommodate the exports of the forestry industry were built in addition to the railroads. This construction boom led to the need for building materials which created a subsidiary boom in quarries for lime, sand, gravel, etc.

However, in the long term there was one problem with the Concession System. The colonial administration could no longer control or encourage investment in mineral resource development. The holders of the land concessions focused their capital investment on the highly profitable forestry industry. There was little to no interest in systematic mineral exploration while forests were readily available to be logged. Yet, at the same time, outside investors were unable to invest in mineral exploration because they could not obtain legal access to most of the land in Newfoundland.

Post-Confederation

1949 to 1975

Newfoundland ceased being an English colony in 1949. For approximately the last 20 years it had been ruled directly by England. In that year, Newfoundland and Labrador joined Canada as its 10th province.

The Liberal Party of Newfoundland and Labrador was elected in the first provincial election and continue to be elected until 1972. This new provincial government inherited the Concession system from England and continued to expand it. Grants were not made by the newly formed Department of Mines. Rather, grants of Land Concessions were given directly by the Premier’s office. By 1953, almost 80% of the land in the province was owned by only eight large corporations. This land ownership included practically all of the land within the province with potential for mineral exploration.

The Department of Mines had been, and remained, severely underfunded. Exploration expenditures and exploration results were not reported by Concession holders. The minimum annual expenditures that were required to maintain ownership of the Concessions were not monitored. What mapping of the province that occurred was done by the Government of Canada at a scale too large to be useful for mineral exploration.

Give the mineral wealth of Newfoundland and Labrador, it was inevitable that Concession holders would make mineral discoveries despite the limited exploration allocated to exploration. The majority of discoveries made were base metals and building materials. (World class deposits of iron ore were discovered in Western Labrador.) However, systematic and sustained mineral exploration did not occur. For all intents and purposes, the exploration for mineral resources in the Province of Newfoundland and Labrador remained virtually at a standstill.

In 1972, the Conservative Party of Newfoundland and Labrador was elected to govern.

The Conservatives held power until 1989. They immediately commissioned studies on how best to modernize the Province’s mineral policy and system of land tenure. The result of these studies was the decision to modernize the system of land tenure in Newfoundland by moving away from the Land Concession System to the system of Mining Leases.

In 1976, a new Mineral Act was passed by the Parliament of Newfoundland and Labrador. The Mineral Act ended the use of Land Concessions to encourage mineral resource development in the province. Mineral rights would be retained by the province and those companies staking exploration claims on specific geographic areas would be granted a Mining Lease to explore the area staked. (Staking a claim actually required that stakes, usually wooden, be driven into the soil to delineate the perimeter of the claim. Hence, “staking a claim”.

A requirement for escalating expenditures was imposed with each mineral lease. This policy ensured that once an individual company ceased doing exploration work the mineral leased had to be surrendered. Detailed reporting of both the exploration work and its results began to be rigorously enforced by the Department of Mines. Therefore, the new holder of a mineral lease could begin exploration where the previous exploration had ceased.The problem that remained was how to encourage the holders of the Land Concessions to either start actively exploring for minerals or surrender their mineral rights to the Province so that others might explore.

The Minerals Holdings Impost Act of 1978 was passed by the Provincial Parliament to address this problem. Holders of Mineral Rights under the Land Concession system were required to either explore for minerals or pay an escalating tax per acre held. The Act had its intended result. By the early 1980’s approximately 90 per cent of the mineral rights held by the owners of Land Concessions were returned to the Province.

This change in land tenure enabled competitive claim staking in the Province of Newfoundland and Labrador and ushered in the first flurry of gold exploration in the history of the Province.

The 1980s to the Present

The 1980s

Prior to the 1980s, there had been little interest in gold exploration. Mineral exploration, when it occurred, was focused on industrial minerals (e.g. iron and copper).Three factors precipitated investor interest in gold exploration in the province:

the sudden availability of land to be explored
a tax incentive program by the Canadian Government ( flow-through shares) that encouraged investors to invest in junior exploration companies
a rapid increase in gold prices.

The 1990s

In 1991 diamonds were first discovered in Canada. Previously, it was thought that the existence of diamonds in Canada was geologically impossible.

Investment capital was diverted from gold exploration to diamond exploration. Exploration was particularly focused on Labrador. Diamonds were not found. However, diamond prospectors did discover a world class, high–quality nickel deposit at Voisey’s Bay, Labrador. This deposit is considered to be the most significant discovery of nickel since World War Two, rivalling the nickel deposit in Sudbury, Ontario.

2000 and beyond

In the early 2000s, investor interest returned to gold exploration in Newfoundland. Gold prices had begun to increase significantly after a decade of stability. While competing for risk capital with the high-tech bubble (which crashed) and the cannabis bubble (that went up in smoke), company expenditures for gold exploration in Newfoundland have consistently increased year over year. As the map below illustrates, exploration companies are seeing excellent drilling results. One discovery from this period is already in the process of being developed into a mine.

Summary

Despite its rich geological endowment, Newfoundland has experienced only 30 years of gold exploration in its entire history, first as a colony of England and then as a Province of Canada. This absence of exploration in such a gold rich environment makes Newfoundland one of the unique investment opportunities of this century.