Vein of optimism runs through mining industry ahead of PDAC Conference
Ore is taken from Inco's Goro Project in New Caledonia in this undated handout photo. (ho-Inco / THE CANADIAN PRESS)
TORONTO -- With commodity prices on the rise, attendees at the world's largest annual gathering for the mining industry are expected to be cheerier than they were last year.
The Prospectors and Developers Association of Canada convention, which kicks off in Toronto Sunday, provides a good sense of the level of optimism in the industry, and organizers say they're gearing up for a solid year.
Last year, booth space at the trade show and the investors exchange was nearly sold out. This year there is a waiting list.
"I would say the sentiment is cautiously optimistic," said Andrew Cheatle, PDAC's executive director.
Commodity prices have begun to move higher after a protracted downturn that, for several years, had put a stop to the raucous industry parties where booze flowed freely.
Slowing economic growth in China led to concerns about a glut of coal, iron ore and other commodities, mining stocks plummeted and interest in junior mining and exploration companies had just about dried up. Faced with a grim outlook, mining companies reeled in their spending.
But since then, prices for gold and other metals have rebounded and investors have started returning to the sector.
"It's astounding how quickly the tables have turned," said David Harquail, CEO of Franco-Nevada Corp. (TSX:FNV).
"Share prices are up, the big companies are talking about dividends and the smaller companies are raising money for new projects again. It's a different world all together."
Harquail recently returned from the Bank of Montreal's Global Metals & Mining Conference in Hollywood, Fla., a precursor to the PDAC convention.
"There's no question -- everybody's more upbeat," said Harquail. "In fact, everyone was partying as if gold was at $1,900 again."
Harquail, who has been attending the PDAC convention for roughly five decades, has seen his share of boom-and-bust cycles.
As a young boy he would accompany his father, who had started several exploration companies, to the event. The industry was very different back then, he recalls.
"There were really no brokers raising the money for the junior companies," Harquail said.
"People raised it directly from investors. So it was a very face-to-face business."
He recalls watching his father unroll the maps he had coloured himself onto the bed of their hotel suite. He would invite various investors to come look at his proposed drilling projects for the summer. If they were onboard they'd hand him a cheque.
Since then, the industry has become far more sophisticated and the convention has grown in prominence.
And although capital is beginning to return to the sector, industry executives say we're still far from the highs of the last commodity boom several years ago.
"We haven't come back to the really buoyant, exuberant days," says Rob McEwen, chief owner of McEwen Mining.
While many companies have a little more cash on hand, they may be hesitant to spend it because they're not completely convinced that commodity prices are heading higher, says McEwen.
Harquail echoed the sentiment, calling recent commodity rallies "tenuous." He noted that gold -- currently trading at around $1,200 -- has begun to pull back again in recent weeks amid expectations of a U.S. Federal Reserve rate hike.
While commodity prices have improved from last year, they're still far from bull market territory.
"When things are at their absolute peak that's when the biggest, most epic parties are thrown, typically, and we're not there yet," said Integra Gold chairman George Salamis.
"We're still in the early stages of that so I wouldn't expect to see anything too crazy this year."