Over the past two days, I have been attending a convention hosted by the Prospectors & Developers Association of Canada (PDAC) in Toronto, Ontario, Canada. This is one of the world’s biggest events where mining industry experts and associations meet and talk about exploration and development opportunities across the globe. Mining companies also showcase their projects here each year. Attendees can meet firms that provide services to mining companies as well, be it drilling, surveying, water treatment, consultation, and so on. Though the PDAC convention is all about the mining of different minerals, the main focus I have noticed is usually on gold and silver mining.
Why I Attend the PDAC Mining Convention
I go to the PDAC convention and other related events for two main reasons: to get a better understanding of what’s happening currently in the sector and to get an idea about where the precious metal market may be headed next. My reasoning behind this is very simple: precious metal mining companies and industry experts see the trend changing before anyone else does. Listening to what they are saying and doing can give you a head start.
With this said, this year, in my opinion, was the most interesting one so far. I attended corporate presentations and talked to companies that provide services to mining firms. But here comes the interesting part… Usually, when you are at corporate presentations, in addition to new developments, you also hear companies talk about their bullish sentiment towards precious metals. This year, it was different.
What Companies Had to Say About the Depressed Precious Metal Prices
I attended well over 20 corporate presentations in the two days I attended the convention and only a couple of companies talked about how they believe the gold and silver markets will turn. In fact, many pretty much said they were trying very hard to cope with depressed precious metal prices.
The majority of the companies, be it during their corporate presentations or when I spoke to their reps on a one-on-one basis, talked about how they are aiming to generate free cash flow and reduce costs. There weren’t many companies that wanted to talk about how much money they are actually spending on their exploration—this has collapsed since 2013—or if they are just stripping away the higher-grade ground just to stay in business.
From all of this, here’s what I learned…
My Convictions Were Confirmed
No matter how you look at it, mining companies are showing signs of improvement. They have learned what to do now and are focusing on just that. As I have said many times in these pages, companies that are producing more and reducing costs are going to be the ones that will stay in the game for the long-term—even if gold and silver prices remain low for an extended period. When it comes to exploration, yes, it has dropped significantly, but there are companies doing targeted drilling.
It also should be said that not all the companies in the sector are going to be the same. There will be companies that will have troubles and may not survive.
Considering the bigger picture, though, companies looking to just stay in the game and not make statements about where gold and silver prices are headed gives me an idea about uncertainty in the overall precious metal market.
Keeping all of this in mind, at this point, investors should start to pay attention to the precious metal mining sector. It continues to improve. I am convinced that the only factor stopping it from skyrocketing are gold and silver prices. And the best part is you don’t need them to go to their 2011 highs. A move of 20% to 30% in precious metal prices from their current levels can send some mining companies’ share prices soaring more than 100% in a very short time. And that’s what investors will want to pay attention to.