Angela Harmantas | SmallCapPower | Mar 4, 2016 We would all be forgiven by the mining gods if we approached PDAC 2016 with a feeling of ambivalence, having long since tired of the same stories of woe in metals markets. The sector is now in its fifth year of a crushing bear market and investors have grown weary of hearing declarations of the bottom, only for prices to hit new lows. Given this set of circumstances, it is hard to imagine why anyone would want to attend the world’s largest mineral convention. That is fair reasoning, but this year’s convention may not be quite the gathering of the walking wounded that we expect. Here are a few reasons why I’m looking forward to PDAC 2016 – and why the conference still matters:
Gold prices are behaving differently than usual, but it’s a good thing. The week before PDAC, gold is trending higher. That’s not unusual, because most commodity prices have a slight bump in the weeks leading up to the convention. What’s interesting is gold’s success in the wake of stronger US markets, which runs counter to the safe haven hypothesis. The net effect of higher prices coupled with strong US markets will certainly play out over the coming months, and PDAC could be a good testing ground for the myriad gold juniors on the trading floor.
Forget gold – copper is the metal to watch. Very few metals can attest to the turnaround story that copper is experiencing in the early part of 2016. After hitting seven-year lows in January, prices have rallied and the once-tarnished metal is now looking much more healthy. Copper’s bull run does come at the cost of mine closures, however, which could mean that it is not sustainable over the longer term, but billion-dollar deals are in the works: Japan’s Sumitomo Metal Mining bought a 13% stake in Freeport McMoRan’s Moronic mine for US$1 billion in February, and Glencore’s order book is apparently strong. Other companies may be planning to take advantage of the deal window, however small and compressed the timeframe.
Most of the “zombie” companies have already been weeded out. By this time in the commodities slump, if a junior miner has a booth at PDAC it generally means they are in decent shape. Broadly, we can expect to see mining companies with a strong management team who have adopted strategies to weather the storm. Considering the dearth of new mining listings on the TSX and the Venture Exchange over the past few years, as simple as it seems, these companies, folks, are the cream of the crop.
Be sure to follow our Twitter account @smallcappower as we report from PDAC 2016, and stay tuned for expert interviews straight from the convention floor in the days to come! Questions? Comments? Feel free to contact me at email@example.com.