PDAC2015 conference: Friedland tells junior minerals sector to look on the bright side
A beaten down mining sector moved to give itself a lift by rolling out one of its superstar financiers at the start of the Prospectors and Developers Association of Canada conference in Toronto Sunday.
Singapore-based mining tycoon Robert Friedland has spent the last three decades building and financing mega mining projects on three continents. Since Rio Tinto PLC (RIO-NY) took control of the Oyu Tolgoi mine in Mongolia, Friedland’s Ivanhoe Mines (IVN-T) has lately turned his focus to copper, zinc, platinum and other metals in the Democratic Republic of Congo and South Africa.
On Sunday, he opened the four-day PDAC conference by telling a commodities outlook seminar that “the ladies and gentlemen who go out and look for mineral deposits are the good guys.”
He was referring to his long held view that far from being an environmental threat, the mining sector is a vital source of metals such as copper, platinum and zinc to a global population that is urbanizing at a rapid pace.
By 2050, he predicted that 66% of the global population will be living in cities, a move that will only boost consumption of those metals.
“In urban environments, people have become divorced form the supply chain,’’ Friedland said. “A lot of people think that a ham sandwich comes from a fridge,” he said.
It is a message designed to lift a junior exploration sector that is locked in an entrenched recession, one that is making it very difficult for many of its participants to raise the money just to keep the lights on, left alone fund exploration at the project level.
“It’s hard to say when things are going to come back,’’ said Bill Roscoe, Chairman Emeritus and Principal Geologist with RPA Inc., a Toronto based company which does project evaluations for mining companies. RPA has a client list that includes Fission Uranium (FCU-T) and Denison Mines (DML-T)
Roscoe said it has become so challenging for juniors to raise money on traditional public markets that RPA is now doing a lot of evaluation work for private equity firms.
It might explain why there appeared to be more empty booths than usual in the trade show area of the PDAC conference, which is expected to attract a crowd of 25,000 to the Toronto Convention Centre this week, including delegates from 103 countries.
Regarded by many as the premier event on the mining calendar, PDAC is a key opportunity for attendees to network, listen to high profile speakers and generally gauge the state of the industry.
One veteran industry official said the lack of new mineral discoveries and the fact that a lot of old projects are being rolled out and dressed up for possible sale is instructive, at least to him.
“It is usually as sign that the industry has hit bottom,” said Michael Power, a Toronto-based consultant who has worked in the sector for nearly 50 years.
For others, beaten up stock valuations, are more of an opportunity than a challenge. Bernard Guarnera, the President of Broadlands Mineral Advisory Services, a Nevada-based private equity fund, said he came to the conference in search of advanced stage projects that could be in production within 2 years.
“These are projects that have largely been de-risked,” he said.
Guarnera said there is a lot of money out there waiting to be invested in projects. But investors are afraid to spend it.
“Conversely you now have some of the strongest economics for the hard commodities that I’ve seen in my lifetime,’’ he said. This is a reference to forecasts of declining mine supply for metals such as copper nickel, zinc and lead.
During his speech, Friedland said some of the big copper mines in Chile are “like little old ladies waiting to die.”
He predicted that demand for copper, for example, could get a lift from efforts to fight contamination in hospitals. He said anti-microbial copper could be sprayed on stainless steel surfaces in hospitals to remove the threat of germs.
However, one industry official laughed at Friedland’s suggestion.
“Why wouldn’t they just use plastic,’’ he said.
Trading at 83 cents on Friday, Ivanhoe has a market cap of $576.4 million, based on 694.5 million shares outstanding.
The 52 week range is $2.04 and 67 cents.
Ivanhoe Mines is picking up a PDAC award this year for its Kamoa project in the DRC. It ranks as the world’s largest undeveloped copper discovery with an indicated resource of 43.5 billion pounds of copper, the company has said.
Peter Kennedy, Stockhouse |
