Major Drilling sees huge metal supply issues

By Carole Vaporean

NEW YORK (Reuters) - Major Drilling Group (MDI.TO), the world's second largest mine driller, sees supply challenges as the main driver keeping metals prices strong over the next 15 years, whether demand slumps or not.

While Chief Executive Francis McGuire said he thinks the mining industry is in a cyclical upturn, he added that Major Drilling, headquartered in New Brunswick, Canada, is focused on a changing environment for locating new sources of metal ore.

"We think there is a more fundamental and more important structural change occurring in the mining industry that is going to change the way operations function for the next 15 to 20 years," he told this week's Reuters Global Mining Summit.

Minerals that were easy to access have been found and are being depleted at a relatively quick rate, he said.

"It is somewhat surprising to investors when you look at the amounts of money that are being spent in exploration over the last three or four years and we're really not finding anything."

Since a 2003 low below $3 billion, worldwide exploration spending surged to $14 billion in 2007. Despite the increase, no major deposits have been discovered during that period.

Since 2000, he said, only Ivanhoe Mines (IVN.TO) has made a large discovery with its Mongolian copper and gold project.

Some exploration sites do pan out, but McGuire said their actual tonnage or ounces turns out to be "tiny."