The bear market was tough. Lots of companies went into complete hibernation; lots of people left the sector. It takes time for companies to get going again, but they have begun to get back on their feet, says Gwen Preston, founder of Resource Maven. She discusses some of the major trends she sees in the mining industry, and profiles several companies that survived the lean years and could lead the pack going forward.
Majors Are on the Hunt
Majors, after selling almost everything to survive the bear market, need to start restocking the pipeline again. Usually that process starts with new production and near-development stories, but there just aren’t very many such assets around. The bear market derailed so many projects that only a small number are ready to be built or are newly operational. Majors are circling these opportunities but, because they know competition will be stiff, they are also going straight to exploration-stage opportunities.
However, don’t expect a wave of M&A. Instead, I think we are going to see a wave of partnerships—joint ventures and equity investments that give the major a foot in the door with assets they like. And while such deals aren’t as exciting for the market as takeouts, they are important because they make it possible for juniors to advance their projects quickly and to focus on exploration instead of where and how to find capital.
Optionality Offers Leverage, but Little More
Optionality plays have done very well in gold’s run to date. Investors have piled into the idea of leveraging gold via a portfolio of projects with significant ounces in the ground. That leverage will remain. And leverage to a rising price is win enough for many. However, if a win for you means a takeout or a construction decision, optionality isn’t the right …read more