Prospectors drill for ways to revive industry

Toronto welcomes nearly 30,000 miners from around the world amid market lows

It’s been a frosty year for miners after more than a decade of boom times in the metals market, but you just can’t keep the prospectors down.

Up to 30,000 mining industry types, from old-time claim-stakers to the suits who finance their projects, will converge on the Metro Toronto Convention Centre over four days starting Sunday for the 82nd annual Prospectors and Developers Association of Canada (PDAC) convention.

The backdrop to the industry’s biggest trade show is the struggle of small-cap, non-producing exploration companies (many of which are penny stocks).

They are trying to recover from the doom and gloom of the last year, which saw slowing demand from China and other emerging markets along with withering metals prices and tanking resource stocks.

“It’s a very difficult market and they’ve been bruised pretty badly,” says veteran mining analyst Barry Allan of Mackie Research Capital.

The prices of almost all precious and industrial metals fell last year; investors lost confidence in commodities as an asset class, and junior miners struggled to raise capital and stay afloat.

Heavyweights such as Toronto’s Barrick Gold Corp. had fire sales on expensive mines, mothballed projects, wrote down billions in assets and slashed staff in efforts to conserve cash and ride out the storm of record-low share prices.

But when the going gets tough, the eternally optimistic miners just keep going, exploring for the next big find that will get the industry buzzing again and potentially launch another market rally, says Allan. With share prices so low, more mining firms are expected to be scooped up by bigger players this year, and investors have an opportune time to buy into rock-bottom resource stocks, says PDAC executive director Ross Gallinger. “The juniors are very resilient, and we’re starting to see more optimism and activity in the sector,” he says. The gold price, which fell 30 per cent last year, was expected to drop even further in 2014 but has so far seen a 10 per cent bounce in its traditionally strong first quarter and increased demand from China and India. And two hostile takeover bids in Canadian mining are breathing new life into the moribund sector. Goldcorp Inc. has launched a $2.6-billion offer for Osisko Mining Corp. and HudBay Minerals Inc. followed with a $428-million offer for Augusta Resource Corp. Last year was slow for mergers and acquisitions in resources, but things are expected to improve in the coming months, with developed economies beginning to stabilize and miners looking to add strategic assets, says PricewaterhouseCooper’s new Global Mining Deals Report. The volume of deals fell to its lowest level since 2005 as mining companies moved from diversification to focus on core assets and commodities, says PwC’s global and Canadian mining leader, John Gravelle. The report noted that gold mergers will increase in the coming months, but mostly with smaller, strategic deals in fiscally stable, gold-rich countries such as Canada. “Companies have been cleaning up their balance sheets and putting off decisions, waiting for the right time to act. That timing is near,” says Gravelle. Allan agrees that things are slowly starting to look up in the market, “but it hasn’t flown down to the ju- niors just yet.”

More than half of the capital for all global exploration and mining projects is raised in Toronto, including a good chunk of it at the convention centre starting Sunday, where miners get to display drill core samples and make their sales pitches at their booths and later over a few beverages.

Delegates from 125 countries will vie for new investors at the annual industry blast, with major groups coming from Peru, Chile, India, Brazil, China and Mongolia, among others. Toronto hotels are booked solid through Wednesday and downtown restaurants and bars are usually packed for the massive event, which pumps an estimated $80 million into the local economy.

“I call it old home week,” says Allan. “It’s that once-a-year event that gets the guys out of the bush and allows the industry to really network,” he says.