Thank you, Mr. Chairman and members of the committee. I appreciate the opportunity to be here today, and I'd like to add my voice to Gordon's to say that we really appreciate the reformation of this committee. It will be a very useful venue going forward.
My presentation is supplemented by a deck and a brief that was submitted to the clerk last week.
All I need to say about the PDAC is that we represent the Canadian exploration business, and our members include pretty well everyone who has anything to do with this business. Since they're all around the world, our activities are not only in Canada but extend internationally as well.
I'd like to begin by making a few key points about the fundamental nature of the exploration business. Exploration is the R and D of the industry. We've heard R and D mentioned a few times this morning. This is the way we look at it. A manufacturing company will invest in R and D to generate a new product. The mining industry will invest in exploration to develop a new mine. There's an interesting distinction here. A new mine creates new wealth; a new product primarily redistributes wealth. I think that's important.
In addition, exploration activity on its own stimulates economic activity in northern and rural activities. It creates employment, and that employment can include aboriginal people and students. That is an important thing.
The second point is that Canadian juniors are very significant in the exploration business, both at home and abroad. There are over 1,000 of these small enterprises, and they consist of three to five highly qualified, experienced people. They depend primarily on the capital markets to fund their exploration efforts. These are our modern prospectors, if you will. At the present time they account for no less than 60% of exploration that's spent in Canada, and about 30% of worldwide exploration.
The third thing is that exploration is a high tech business, but discovery is very challenging. The problem is that most of the deposits lie beneath the surface, and we have limited direct access to that third dimension. That's why the GSI database is extremely important to exploration.
To illustrate the challenge, only one discovery in about 10,000 will become an operating mine, and it takes about seven to twelve years to go from discovery to an operating mine. In the process, most of the time we'll spend tens of millions to billions of dollars. So it is a high-risk and capital-intensive business.
Important factors of competitiveness in our industry include the fact that we are price takers, not price makers. Commodity prices are cyclical and can dramatically affect the availability of exploration capital. Exploration funds are extremely fluid and flow toward the best opportunities around the world, wherever that may be. Right now there are about 100 countries competing for the global pool of exploration capital. So it's not only a high-risk, capital-intensive business; it's also very competitive.
The global context in which we find ourselves today, if you want our current reality, is characterized by unprecedented opportunity and some challenges. We are in the midst of a global commodity boom, as you know, and this could be sustained for quite a long period of time--we estimate maybe two or three decades. Canada, as one of the world's leading mining jurisdictions, should be able to derive significant economic and social benefits from this. In order to position Canada to fully benefit, we have to deal with two key realities. One is declining reserves of commodities, in particular, base metals. The other is a shortage of new discoveries in the pipeline.
In recent years Canada's reserves have been declining, particularly base metals. It's been a gradual decline over a couple of decades, but it is now at a point where we're very concerned about our mining infrastructure and the communities that depend on it. We're also looking at a potential lost opportunity here in the context of the global commodity boom. Given the long lead times from exploration through to production, as I talked about before, we'll not be able to take advantage of this global commodity boom unless we address our declining reserves pretty quickly.
The shortage of new discoveries in the pipeline is more of a global nature. The mining industry suffered a very serious downturn from 1997 to 2002. The severity of this was unprecedented in recent times. As a result, there was little investment in exploration and discovery rates declined dramatically. Since 2002, as you know, there has been a strong recovery, driven by demand from China, but not enough time has passed for the exploration efforts to produce the fruit and generate significant new discoveries. We need an extended period of strong exploration to recover.
The PDAC has proposed a strategy to address these challenges. Basically, it focuses on two fundamental elements that have served us well in the past. One is a reinvestment in geoscience, and the other one is to maintain tax incentives for exploration. The details of this are included in our brief. I won't go into them now. But it's important to note that this strategy was unanimously supported by all the mines ministers from the territories, the provinces, and the federal government at the last mines ministers conference in September 2005.
The super flow-through share program was extended in the last budget, and we very much appreciate that. We now await the federal government's decision to initiate the other elements of that strategy. Probably the most important one is the reinvestment in geoscience through the cooperative geological mapping strategy.
Thank you.