Close to twenty-five thousand mining industry producers and suppliers converged earlier this month at the 2015 Prospectors & Developers Association of Canada conference. Sentiment at the gathering, which PDAC bills as the “world’s largest exploration and mining event,” was cautiously optimistic.
“When the average price of mining stocks listed in the Toronto Venture Exchange’s mining component is down 85 percent – 90 percent if you include companies that were taken out of the index because they went bankrupt, you have what amounts to a huge sale,” said Rick Rule, chairman of Sprott Global Resource Investments. “That means assets and properties are 90 percent cheaper. Years from now, investors will look back on 2015 as the “good old days,” when almost everything could be had at a really good price.”
Brent Cook, a mining investor and publisher of Exploration Insights agrees. “The industry has had a terrible time during the past five years, particularly on the exploration side, where discoveries of economically feasible deposits are fewer and farther between. There will be some further washing out of unsuccessful plays in coming months. But we are beginning to see green shoots indicating that a recovery may be on the way.”
Canada, which like Australia, is blessed with a wide variety of resources, can somewhat be regarded of a proxy for global extractions industries, which have literally been clobbered across the board. A recent report by Barcley’s described 2014 as the worst for commodities since 2008. The 22-product Bloomberg Commodity Index for example fell to its lowest level in almost six years and was off 17 percent last year alone. Global non-ferrous metals exploration for its part fell by 26 percent in 2014, compared to the previous year. Capital spending budgets on machinery and equipment were also hit hard.
Much of this is the result of sluggish global economic growth, which, according to a recent report by SNL Metals & Mining, tends to move in tandem with demand for metals such as aluminum, copper and zinc. In Canada sluggish global demand for Alberta tar sands, – said to contain more oil than Saudi Arabia, – has been hit by weak oil prices, which in January fell below the US $50 per barrel level.
Canadian uranium players for their part, such as Cameco and Fission Uranium, are reeling in the wake of the Fukashima disaster, which has called into question the entire nuclear power industry. Iron ore projects such as Iron Ore Company of Canada and Tata Steel Minerals Canada are also feeling the pain, in the wake of a two thirds drop in prices, due to in part to slower sales to China, the world’s largest iron ore consumer.
A tougher geopolitical environment is also hurting Canadian mining industry companies, many of whom operate internationally. At PDAC, sector promoters often (not-so-jokingly) make few distinctions between third world dictators who are apt to seize mines, and Western politicians who act more subtly.
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