Hard to kill

“Prospectors foregathered to the number of about 150 in Toronto on Tuesday to form an association and to formally protest against the passage of the proposed Engineers Act. Organization was quickly perfected, the meeting was thrown open to discussion, and resolutions were adopted. The meeting was of a single mind, that the proposed legislation was against the interests of prospectors and of the mining industry in general.”

— A contemporary account of the founding of the Prospectors & Developers Association, as reported in The Northern Miner (March 4, 1932).

Well, the Engineers Act didn’t kill the mining industry, and neither did the merger of the Toronto Stock Exchange and the Standard Stock and Mining Exchange, which was being bruited about back in those days too. There are clear parallels with modern fears of over-regulation and the consolidation of the securities markets — that infernal Toronto Stock Exchange swallowed everything, in the end — but the lesson we take from those 72 years, marked this week by the annual convention of the Prospectors & Developers Association of Canada, is that the Canadian mining industry has been awfully hard to kill off.

Granted, it’s not always easy to feel that way in the deepest part of the business cycle. The commodities slump that started in the late 1990s lasted about four years, but it felt like forever. Yet even in those years, we could find reasons to be hopeful about the future; there were staking rushes in the Otish Mountains, the northern Slave region, and on Melville Peninsula; there were even a few discoveries (though they didn’t set off any market madness).

So now that things are cooking once again, it’s good to reflect that the principle that tough times do end was true in 1932, and it stayed true in 1982 and in 2002. Cycles are called cycles because they turn, and even the most beaten-up commodities come back into economic fashion.

Of course, the turn-of-the-century beating was probably nastiest for gold, so it may have been inevitable that gold would lead the market back into the light. Two years ago, gold was just about to cross the US$300-per-oz. line and we were hopeful. A year later, it was US$340 and we were elated.

A resurgence in the gold price always turns in favour of the junior sector, for several reasons. First, because barriers to entry are lower in the gold business, a junior with a good property can turn itself into a producer relatively easily. Second, because gold exploration, more so than diamonds or base metals, lends itself to sudden news and spectacular grades, juniors may find it easier to pique the market’s interest. Third, the metal itself draws speculators.

Gold has launched several junior mining cycles, not least the one that followed the depths of the Depression in the early 1930s. It is launching another today.

Luckily, it’s not alone. Base metal markets are healthier than they have been since the mid-1990s (and nickel prices are even a little euphoric). Minor metals, as we pointed out last week, have all turned in the same direction. Mankind has decided — for the umpteenth time — that it needs metals.

Filling one of advanced society’s basic needs is one thing that keeps mining alive. Another thing mining does, and another thing that keeps it alive, is to provide the building blocks of progress. Back in 1932, the industry’s attention was riveted on Great Bear Lake, and Gilbert LaBine’s discovery of uranium-radium-silver mineralization at Echo Bay. The dawn of the Atomic Age has taken a long time to peek over the hill of energy economics, and some of the excitement that surrounded LaBine’s discovery may seem quaint today. But it shows that the mining industry has always been at the pointy end of technology, whatever disciples of the “new economy” may like to believe.

Today, advanced economies are technological, not virtual. They use plenty of metal, still. And when they recover, they want commodities. It’s a nice feeling, when it comes around again.