After a cursory glance at the PDAC 2014 numbers you could be mistaken huge change was not afoot in junior exploration and mine development. The numbers were strong all things considered. The Prospector's and Developers Association of Canada put attendance at 25,122. That's in line with recent boom years. The usual suspects, with some new faces, filled most available space at the Metro Toronto Convention Center. Opening day hubbub was light, but it picked up early in the week, with the din rising at times on the floor. Yes, the numbers were strong. That was the same as recent years.
But in a few different ways PDAC was remarkable.
A pragmatic attitude defined the junior sector this year. With a market now in year three of a financing drought, CRU's Phil Newman wondered aloud in a talk: was it ever easy for juniors to make a living? (Should it be? was the subtext.) This perspective fell in line with Newman's generally positive take on slower global growth, especially in China, which could allow more rational use of resources after a decade of frenzy. Rebalancing. Perhaps this view is as applicable to China as juniors.
The more pragmatic, more discerning junior sector was evident in the gathering force of private equity. Consider Resource Capital Funds (RCF) as an example. RCF's Ross Bhappu, speaking Wednesday, noted it started as a $40 million fund in 1998. It raised $2 billion last year, mostly to fund deals on the smaller to mid-size end of the junior scale. Funds like them are pickers. They dig into drill results with brain resources that Joe and Jill investor, for the most part, could only hope for: 70 staff, independent resource modelling and the like.
Private equity – on much harder terms than exuberant equity markets – is stepping into the financing gap in fair measure. It will not fill it. And certainly less bluster will pass through its gates than sometimes over-eager brokerage houses. But it provides more patient cash to an industry that requires patience (another topic of discussion this year at PDAC).
Bhappu described time horizons on investments up to a decade. And RCF is a small player compared to newer money – hedge funds and sovereign wealth funds – aiming to take the sector by storm. We've heard much of the everest pile of cash sitting on the side lines in general hedge funds. $30 billion? $60 billion. Bhappu said he had no idea how much was out there, though it was significant. And while there has not yet been an avalanche of deal making, Bhappu was curious what the hedge funds would chase and what impact they would have on the junior and mining market.
Community relations – issues and approaches to it – also factored heavily at PDAC 2014. It was hard not to walk in on presentations at PDAC that did not address community relations – good ones, genuine ones, and ones with early starts – as key. We're not just talking planks of a strategy. We're talking the strategy to get a project built. If you can't convince people, especially locals, a mine will do good, then increasingly your project will tread water or, worse, drown. That trend to really embrace early and long-lasting relationship building will continue.
There was also controversy.
The Canadian federal government had an unusually heavy presence at PDAC this year. It was the first time a Prime Minister addressed the convention. Attendees like Joe Oliver, Minister of Natural Resources, and Leona Aglukkaq, Minister for the Department of Environment, who were present, are more typical.
Minister Oliver and Prime Minister Stephen Harper attempted to explain a recent permitting decision, Agglukaq's file, on Taseko's New Prosperity project but failed miserably. They did not address a controversy over proposed tailings management. The allegation – not refuted by the government – is that the federal government based its rejection on erroneous conclusions over potential water contamination. Prime Minister Harper specifically fingered water as the crux of Canada's decision to reject New Prosperity in a question and answer session at PDAC on Tuesday. And Agglukaq refused direct questioning by Mineweb on the matter.
It is not an issue that will evaporate into the ether. It will dog the government on trust in environmental permitting for years. Prime Minister Harper implored the PDAC audience to remember his Conservative government's support for the mining industry. But the gold standard for miners and developers is not funding on this and that program or approvals on one project or another. It's predictability. It's being treated fairly under known rules and parameters. It's being able to understand a process and make decisions based on them when you're committing hundreds of millions of dollars or more over decade-long time lines.
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