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Mining companies will meet at the industry’s biggest conference next week under the darkest cloud in a decade, but a recent bounce in the price of gold and silver and a trickle of investment and acquisitions are starting to pierce the gloom.
The renewed optimism may set up a fierce competition for funds among small explorers who have woken from years of hibernation and now appear to be gang rushing a small, wary group of investors. A Reuters survey shows that a majority of the small, Canadian-listed miners that help drive global mineral exploration expect to drill this year.
The same companies appear to be counting on an influx of funds first. More than half of the Toronto Stock Exchange (TSX) and TSX Venture (TSX-V) miners and explorers that participated in the Reuters survey said they were “very likely” to seek financing in the coming 12 months. A majority also are at least somewhat likely to announce a “merger of equals”, often looking to tie up with a better-heeled rival.
The investment thaw so far is limited to bigger, cash-generating producers of metals and minerals who have embraced costs cuts and profits above all else, as well as a handful of smaller miners with high-quality, low-risk projects.
The smallest explorers, the so-called junior miners, who need funds the most, may have the toughest time finding them as investors, smarting from three years of losses, only consider backing the best projects.
Lower metal prices, runaway costs and colossal financial writedowns had caused investors to flee big and small names after a near decade-long mining boom fueled by China’s hunger for raw materials.
“It is very tough and I don’t see it loosening up any time soon,” said Gorden Glenn, interim chief executive at Auriga Gold Corp, a tiny gold exploration and development company with properties in Manitoba.
Without revenue or investment, the only option is cutting costs, said Glenn, who has not drawn a salary from Auriga in 18 months.
Against this backdrop of uncertainty and hope, some 30,000 people are expected to gather in Toronto next week at the Prospectors and Developers Association of Canada convention, or PDAC, the industry’s largest annual convention and a showcase for mineral explorers and developers.
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