TORONTO/WINNIPEG (Reuters) - Metal and mineral explorers battered by a protracted price slump are still out of favor with investors, however the recent uptick in bullion prices and a few tie-ups with larger miners are offering juniors a glimmer of hope.
The ray of optimism comes as the world’s mining sector prepares for its largest annual gathering, the Prospectors and Developers Association of Canada convention in Toronto. The meeting set to begin Sunday is expected to draw some 20,000 attendees.
Canada is home to the vast majority of the world’s publicly-listed mining companies. Most are early-stage gold exploration companies, so a near 20 percent jump in the spot gold price .XAU to above $1,250 an ounce has boosted gold miners of all sizes.
“Something is happening in the gold market and people are waking up to it,” said Agnico Eagle Mines Ltd (AEM.TO)(AEM.N) Chief Executive Sean Boyd, noting that lackluster global growth, the diminishing likelihood of a U.S. Federal Reserve rate hike and negative interest rates in many countries bode well for gold.
The NYSE Arca Gold Bugs Index .HUI, which includes some large gold miners, has risen some 55 percent this year. Even the S&P TSX Venture Composite Index .SPCDNX, whose components include many small gold-exploration companies, is up nearly 20 percent in the last month and a half.
“We’re now more comfortable talking about a commodity price recovery. The challenge of course, is what this recovery might look like?” said BMO analyst Jessica Fung, noting the mood was more positive this year at the bank’s annual mining conference that just ended in Florida.
“We think it will be a long hard climb, but at least we can talk about it now.”
Even so, miners are hurting and some may struggle to survive another year, especially with limited price recovery on the base metals side.
“It’s just a very tough time for a prolonged period,” said Blake Langill, a mining expert with Ernst & Young.
Still, there has been some revived interest, even for beleaguered base metal players, with copper explorer Aston Bay Holdings Ltd (BAY.V) inking a tie-up with BHP Billiton Ltd (BHP.AX) on their project, while two rivals, Avala Resources Ltd AVZ.V and Reservoir Minerals Inc RMC.V late last year signed similar tie-ups with Rio Tinto Ltd (RIO.L)(RIO.AX).
“Last year, we all thought we were at bottom. That wasn’t the case,” said PDAC president Rod Thomas. “We’re convinced we’re now at bottom and we see a bit of light at the end of the tunnel.”
Reporting by Euan Rocha in Toronto and Rod Nickel in Winnipeg; Editing by Marguerita Choy