The Globe and Mail
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Last updated
Thousands of junior
mining companies are prospecting for cash so they can keep up the hunt for new
deposits amid the downturn in commodity prices.
The miners will be
doing their best to attract investors at the annual Prospectors and Developers
Association of Canada conference in Toronto this week.
A swarm of 25,000-plus
miners, financiers and lawyers from more than 125 countries are expected to
attend the four-day conference, the worlds largest mining gathering, which
started on Sunday.
Funding for miners was
scarce last year and the junior firms, which are responsible for the majority
of new discoveries, are down to skeleton crews and desperate for investment.
I have never been
through anything like 2013. There were times when there was almost no hope,
said Richard Spencer, who has more than 20 years of experience exploring for
minerals and is the chief executive of Toronto-based uranium miner U3O8 Corp.
You just knew that it
wasnt really feasible to raise enough cash to do anything significant on the
projects.
The market
capitalization of the Canadian mining sector dropped to $269-billion in 2013
from $389-billion in the previous year.
On the TSX Venture
exchange, where most junior miners get their start, 36 were delisted. Stocks
that used to trade above $1 have been reduced to pennies.
The worst part was the
dwindling amount of cash on miners balance sheets.
The cash position of
the top 100 miners on the exchange dropped to $1.2-billion as of the end of
June from $1.9-billion in the previous year, according to
PricewaterhouseCoopers LLP.
Without access to
funds they cant get off to the races to do too much, said Ross Gallinger, executive
director of PDAC. Access to capital is the biggest thing on their minds, he
said.
The industry sees
encouraging signs that it will regain favour with investors.
The price of gold is
up 10 per cent this year to $1,330 (U.S.) an ounce after losing nearly 30 per
cent in 2013. The prospects for uranium have also improved since Japan said it
wants to restart nuclear reactors that were shuttered after a 2011 tsunami
caused a nuclear disaster in the country.
In addition, a ban on
raw mineral exports in Indonesia has underpinned nickel prices. Many commodity
experts believe prices for other base metals like zinc will rebound. And a
handful of miners have successfully tapped public and private sources of
capital this winter.
Thats whats
exciting about this year. The level of interest is completely different, said
Mr. Spencer, whose company is exploring for uranium in South America and
recently raised some funds. Mr. Spencer must continue to look for new
investment as the $1-million in the bank
Some mining executives
say last year was worse than the 2008 financial crisis when the global
financial system unravelled.
But lessons were
learned and the junior miners, like the major producers, have had to prove
their worth to investors.
If you just say, I
am going to explore something, somewhere, its not going to work. In 2010,
2011, you could have done that, said David Grondin, chief executive of
Montreal-based TomaGold Corp., which is developing gold properties in Quebec.
Unlike bigger mining
companies that produce and sell metals, the explorers do not pull in revenue
regularly. So the cuts they have had to make have had a wider impact on their
operations.
For example, the
worlds biggest gold miner, Barrick Gold Corp., cut jobs but still produced 7
million ounces of gold. In contrast, Sudbury-based Northern Superior Resources
Inc. laid off 12 of its 17 full-time jobs and has had to curtail its work.
Its frustrating to
have to slow down on a few fronts when we feel like we are very close to
significant discoveries, said Northern Superior chief executive Tom Morris.
His company, which is prospecting for gold on properties in Quebec and Ontario,
is operating off the $5-million it raised during the commodity boom in 2010.
