The ninth trading week of the year was highlighted by another blowout Prospectors and Developers Association of Canada convention in Toronto.
• Compared with last year’s record-setting, top-of-the-market rockapalooza, the festivities were taken down a few notches this year in response to the collapse in mineral prices, tighter credit markets and exploration program cutbacks.
But attendance was off only about 10% to 18,000 and conventioneers tended to say they were pleasantly surprised by the continued vitality in the mineral exploration sector, led by gold’s bright outlook.
While base metals producers are especially hurting these days, more than a few speakers during technical sessions expressed optimism that, thanks to sharp production cuts that have allowed supply to match plummeting demand, base metals prices have already bottomed and are poised to rebound as the year progresses.
In amongst the bustle of the booths, cashed-up Canadian gold juniors stood out as having the most ambitious work programs ahead of them this year. For most everyone else, it’s all about getting through 2009 in one piece and hoping for better days ahead.
• PricewaterhouseCoopers characterized 2008 as having been a “dismal year for junior mining and mining deals” in its two latest surveys of the mining sector. PwC calculated that the total market capitalization of the top 100 mining companies on the TSX Venture Exchange fell from $18.1 billion at the mid-point of 2008 to $4.1 billion by November’s end.
While the worst was yet to come, producing companies within that top 100 posted negative earnings before interest, taxes, depreciation and amortization of $170.8 million for the year ending June 30, 2008, compared with a gain of $59.5 million during the same period in 2007.
In terms of M&A activity, PwC describes how miners experienced a “violent downward tailspin” in the space of a few months in late 2008, with deal volumes plummeting 61% in the fourth quarter of the year towards levels last seen in 2005.
Led by Canada, North America enjoyed the most mining transactions in the world last year. The region accounted for a total deal value of US$32.8 billion in 2008, although this was down sharply from the US$77.1 billion seen in 2007, which included Rio Tinto’s ill-timed US$43-billlion purchase of Alcan.
Of note, Brazil saw a significant surge in deal activity to US$17.7 billion last year, up nearly fivefold from 2007, and Chinese buyers boosted the value of their deals to US$25.5 billion last year from US$6.7 billion in 2007. The Chinese are fast out of the gate in 2009, with another US$23 billion in new deals already tabled.
• Meanwhile, Halifax-based Metals Economics Group tallied some more eye-popping numbers in the form of its 19th annual World Exploration Trends, released in partnership with the PDAC.
MEG calculated that the total nonferrous mineral exploration budgets (excluding uranium) of the world’s mining companies peaked at an all-time record of US$13.2 billion in 2008. This is up 26% from 2007’s total and 2.5 times the estimated US$5.2 billion budgeted in 1997 during the height of the last exploration cycle. The recent nadir was 2002, when it dipped below US$2 billion.
As for uranium, MEG only started counting uranium exploration budgets in 2007, and they totalled an impressive US$1.15 billion last year.
For 2008, the junior sector accounted for US$6.1 billion of total exploration budgets, or less than half of the total after two straight years of outspending the seniors. MEG calls this the “end of the junior boom” since “dismal equity markets and tumbling commodities prices have severely diminished most of the group’s near-term access to capital.”
Canada stood out again as the top destination for exploration dollars, accounting for 19% of worldwide spending. It was followed by Australia (14%), the U. S. (7%), Mexico (6%), Peru (5%), Russia (5%), Chile (3%), Brazil (3%), South Africa (3%), and China (3%).
In what will surely be a one-off event, MEG noted that for the first time since it started its survey, base metals eclipsed gold as the top exploration target in 2008. However, gold exploration dollars still beat out the budgets for the most sought-after individual base metal, copper.
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