Sprott Money News

February 23, 2016

Battered mining sector retreats to Toronto
The Prospectors & Developers Association of Canada’s annual mining event is the world’s largest says Rob Thomas, its president. The sector wiped out more than $1.4 trillion in shareholder value off a key Bloomberg index. So M&A opportunities will abound. Gold investors will be happy too.

Mining industry professionals are already eyeing their calendars for the Prospectors & Developers Association of Canada’s annual conference, which will take place in Toronto early next month.  There they will lick their wounds following a year of plunging raw materials prices and tanking exploration budgets. The only smiles will be on bargain hunters looking to pick up assets at near distressed valuation levels and gold fans, who are hoping the sector has finally turned.

“It’s where the world’s mining sector meets,” says Rod Thomas, who is president of PDAC, and general manager of Votorantim Metals Canada Inc. “We have a huge international presence that naturally includes a lot of juniors. But also Ministers and technical experts. Last year, 24,000 people from more than 100 countries came.”

That the planet’s most important mining conference should take place in Canada should come as no surprise. Fully 57% of the world’s public mining companies were listed on the Toronto Stock Exchange and the TSX Venture Exchanges, as of 2013, according to the Mining Association of Canada. These exchanges accounted for a stunning 62%, of the equity capital raised by the entire world’s mining sector in 2014.

Metals prices are down…but gold may be turning
The mining sector survivors that make it back to Toronto for the PDAC 2016 event, will resemble Napoleon’s army retreating from Moscow after a brutal Russian winter. Base metals prices - ranging from copper to iron ore - have been clobbered during the past year, due to shrinking demand from emerging markets. Equities values have followed suit. Earlier this year the Bloomberg World Mining Index hit an 11-year low, down by more than $1.4 trillion from its 2011 peak.

One bright spot has been gold, which as Thomas noted (on February 22nd), had bounced back more than 15% since the start of year in US dollar terms, and more in many local currencies, due to the greenback’s strength.

M&A speed dating
The current PDAC conference schedule  lists the usual slew of company presentations, technical forums, cocktails and floor exhibitions. Hard core sector watchers are once again expected to arrive early for the “Letter Writers,” presentations , which will take place on the Sunday, before the official opening. Brett Cooke of Exploration Insights, Louis James of Casey Resource Investor, David Morgan of TheMorganReport.com and Rick Rule of Sprott’s Thoughts are among the nearly two dozen presenters, who will be giving their insightful, offbeat and contrarian views in what is surely the conference’s most interesting event.

The big behind-the-scenes story will be unofficial flirtations among potential mergers and acquisitions partners, who will be looking to take advantage of current low interest rates, to combine operations and bring down expenses.

Industry bargain hunters will also be scouring the back rooms for deals to pick up ore bodies that are uneconomical at today’s prices and which Thomas notes, are now selling at extremely low prices by cash strapped companies, who are trying to emerge intact from current tough times.  “These down periods are not unique,” says Thomas. “They last around seven years and the current cycle is tracking what happened last time around, the one wild card being falling demand from China, which could drag things out a little longer. But things always pick up again. We are digging stuff out of the ground and not replacing it with new capacity. That can’t last forever.”

The Prospectors & Developers Association of Canada’s annual conference will take place at the Metro Toronto Convention Center between March 7th and 9th.

Note: for images, please use the picture of Rod Thomas, president of the Prospectors & Developers Association of Canada.




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