Reality confronts miners, investors
TORONTO • The junior mining sector is in such brutal shape right now that most companies are unwilling to even pay for booths at conferences that are geared to them.
The annual Cambridge House International conference in Toronto, going on Thursday and Friday, has shrunk to a fraction of its former size. Just a few dozen junior miners elected to host booths at what used to be one of the sector’s hottest events during the resource bull market.
There is a good reason why almost every junior company decided to sit it out: they have little to no cash, and no prospects of raising any in the near future. Investor appetite for small mining stocks has simply evaporated over the last several years after they lost billions of dollars on these companies. Other sectors of the market have performed much better and drawn their attention elsewhere.
Junior miners have always been a resilient group, and there was a fair bit of optimism on the conference floor on Thursday. But that was tempered by the grim reality of where these companies find themselves.
“It will be hard to raise capital for several years,” analyst John Kaiser warned in a presentation. He said there are around 700 mining companies on the TSX Venture Exchange with negative working capital, and the total number of small miners is shrinking.
“They are starting to disappear,” he added.
Indeed, a lot of junior mining firms have exited mining completely and moved onto some other business, notably medical marijuana. Some of them were at Toronto’s first marijuana investment conference back in June, where the atmosphere was considerably more upbeat than this week’s Cambridge House show.
Lack of cash was a topic on everyone’s mind. Given the rough market conditions, a lot of companies have decided to hoard their cash and do absolutely nothing until market conditions improve and they can raise money again. But miners at the conference said that will not work, because investors will just forget about you.
“If you don’t do anything, there’s no news and you’re not giving the market what it needs,” said Bill Fisher, executive chairman of GoldQuest Mining Corp. and former chairman of market darling Aurelian Resources Inc. “To survive it, you just have to keep active.”
If companies cannot afford to drill, Mr. Fisher said they should be doing geophysical work and other things that cost less money. He also recommended merging smaller companies to reduce overhead costs, which has been happening over the last couple of years.
Besides raising capital, another key topic at the conference was sinking gold prices. The Cambridge House show has always been a gathering point for some of the world’s most outspoken gold bugs, and they continued to pound the drum for bullion on Thursday despite a bear market that has pushed it down to around US$1,220 an ounce.
“The U.S. dollar is on its last legs,” predicted John Ing, president and gold analyst at Maison Placements Canada. Others echoed that view.
Not surprisingly, there was plenty of criticism lobbed at Goldman Sachs, which predicted gold will hit US$1,050 by the end of the year.