TMX POV - PDAC 2019 and the Persistence of Optimism

PDAC, the premier international event for the minerals and mining industry, with its scale and global reach is the ultimate barometer to gauge the mood of the sector overall. This year I noticed with its variety of panels, sessions, meetings and roundtables, there was an encouraging and welcome mood that signaled a "back to business" feeling that permeated the convention.

Strong Support and Attendance From Governments

Every year the convention is attended by international government delegates. From Mercedes Araoz, Vice President of Peru, to Justin Trudeau, Prime Minister of Canada, this year I noticed an increased presence of senior government officials moving beyond the ceremonial roles. This supports the trend of governments at the highest level joining the table to work towards industry solutions to move the mining sector into the Mining 2.0 era.

Mr. Trudeau's discussion with PDAC president, Glenn Mullan, centred around the need for innovation, sustainability, community engagement and regulatory changes to grow the sector. Canada's demonstrated commitment to leadership on the path to a sustainable global mining ecosystem is a very positive development for the sector.

According to Francisco Quiroga, undersecretary of mining at Mexico's Ministry of Economy, the sector has to move beyond finger pointing for past misdeeds and instead focus on developing solutions collaboratively. At the CEO Roundtable hosted by TMX, Mr. Quiroga invited participants not only to identify problems facing mining companies in Mexico but challenged them to include suggestions for solutions that his government could explore. It is encouraging to see decision makers joining the discussion and in many cases taking actions to transform the sector.

Progress Along the Road to "Mining 2.0"

There was a lot of nervous anticipation leading up to the government elections in many Latin American and African countries last year. While there are still many challenges facing all countries (including Canada), there seems to be progress and a willingness to tackle the hurdles along the road to Mining 2.0., in short, most countries appear to be stepping up efforts to reduce risk, which may heighten optimism for mining investors.

One interesting suggestion that received a positive response from all governments was the idea of encouraging long term wealth participation for local employees and communities. Most agreed this starts with education and structures that make equity participation possible -- for example, through local employee shareowner plans – turning stakeholders into shareholders. Companies listed on TSX Venture Exchange automatically qualify for a dual listing on Santiago Stock Exchange, which gives such dual listed companies an opportunity to offer equity participation at the local level in local currency. This dual listing extends the opportunity for local participation to Colombia, Mexico and Peru through the Latin American Integrated Market.

The Dynamics of Mining Financings and "Wandering Eyes"

The optimism that started last year in the sector has definitely persisted and survived the challenges and increased market volatility experienced.

I encountered a larger number of senior executives from large global mining companies with what I'd call "wandering eyes". It seems everyone has been following the mergers and acquisitions trends more closely, especially as large players seek out opportunities to optimize operations, and exploration and development costs, coupled with the supply shortage of key commodities like copper.

At PDAC 2019, heightened optimism was evident amongst many juniors and exploration companies at many breakfasts and one-on-one meetings. There is no doubt mergers and acquisitions and joint venture news will continue in the near term.

Beyond mergers and acquisitions, joint ventures and other structured financing options, the case for optimism in this new "volatility around the corner" world was frequently discussed. Optimism was based on fundamentals, positive (though tempered) global economic growth forecasts, and positively trending commodity prices with supply shortfalls in the near/medium term. It is only a matter of time before equity performance syncs with such optimism and when that shifting window opens, as a mining company, you will want to be in the world's leading stock market for mining.

This article is provided for information purposes only and is not intended to provide any type of advice. This article is not an endorsement or recommendation of any specific securities in any industry nor is it an invitation to purchase securities listed on TSX Venture Exchange or Toronto Stock Exchange. Listing on TSX Venture Exchange or Toronto Stock Exchange does not guarantee the future performance of a security or an issuer.