AME BC’s Dirom concerned about health of junior markets

VANCOUVER — The Association for Mineral Exploration British Columbia’s (AME BC) annual Mineral Exploration Roundup conference is in the rear-view mirror, and in  four weeks the mining community will gather in Toronto for the Prospectors & Developers Association of Canada convention.

These two events can be seen as a barometer for what B.C. miners and mineral explorers of all levels can expect for the coming year.

And there are no shortages of hot-button issues. There’s even concern that the mining business could be staring down one of the most protracted downturns in its history.

While there are now low commodity prices and tough equity markets, there are more uncertainties moving forward.

The prospect of China saving the day with higher gross domestic product growth seems unlikely. At home, questions percolate in Vancouver over the state of Canada’s venture capital markets, and the rise of the environmentalist movement — along with its focus on renewable technologies — has turned permitting in many jurisdictions into expensive political dramas.

The Northern Miner sat down with AME BC president and CEO Gavin Dirom to talk about the mood at Roundup, and what’s going on between industry, government, regulators and First Nation stakeholders in the province.

“People tend to paint us as eternal optimists here, but I’d like the underline the fact we’re also realistic,” Dirom said. “There was definitely a sense of that at the conference that year. We’ve been in this downturn for a while now, and we all understand the challenges we face. On a long-term basis explorers are ahead of the curve in many ways, because they are making discoveries that often take 50 years to become viable mines.”

Lower commodity prices have affected the mining sector across the development spectrum over the past few years. Spending cuts have been a big theme among producers, with overall capital expenses in Canada dropping from near $22 billion in 2012 to just over $15 billion in 2015.

Meanwhile, according to the Mining Association of Canada (MAC), exploration investment fell for a third year in 2014 — 18% to $1.9 billion — breaking the low experienced during the global financial crisis in 2008–09. This equals a 55% decline from an all-time high of $4.2 billion in 2011.

One major theme to start the year is Canada’s moribund venture capital markets — especially when it comes to exploration-stage assets. MAC data indicates that the 1,112 mining companies listed on the TSX Venture Exchange (TSXV) were valued at a combined $7.7 billion and raised $707 million in equity capital through late 2015. The figures show a drop from 2012, when the value of junior mining companies was $19.8 billion and the capital raised was $2.8 billion.

The TMX Group has held two town hall meetings in Toronto and Vancouver to start the year. TSXV president and CEO John McCoach presented results from a White Paper the exchange released in late 2015. The document outlines three priorities to “revitalize the index,” which consists of reducing compliance and administrative costs; expanding the investor base, and generally enhance liquidity; and diversifying and expanding the stock list for the marketplace.

“We need to remember it’s not just one organization that needs to be looked at here. This is a classic example where there are many different stakeholders and groups involved,” Dirom said.

“We’re looking at a truly Canadian issue. I’d say it’s beyond public markets and the TSX. The impression I’m getting is that we’re now at such a level of concern that changes will be made … a point that gets lost a bit is that this problem expands well beyond natural resources. Other industries are not served well by venture markets either. It’s a priority we restore confidence and offer a framework under which informed investors can participate in Canadian companies,” he added.

With the state of the extractive sector — and the broader Canadian economy — provincial governments and industry will look to Prime Minister Justin Trudeau’s newly elected majority government in Ottawa. The Liberals have not championed the benefits of economic stimulus via infrastructure spending, and recently indicated a potential $1-billion package for the oil and gas industries in Alberta and Saskatchewan.

Meanwhile, recent comments from Finance Minister Bill Morneau hinted the federal government may boost its annual infrastructure spending above the promised $5 billion.

“I’m off to Ottawa next week with a group of business and industry leaders. It’s important to make those connections and find the alignments that allow us to prioritize with a whole new government. There are clearly issues that extend beyond our industry toward the global economy,” Dirom said.

“The provincial government has been pretty open in considering a wide variety of suggestions and ideas aimed at helping the industry through these tough times. Our mutual responsibility is to boil the issues down and find a few pragmatic and effective items that can make a difference. The industry, as you can imagine, is definitely open to some assistance.”

The B.C. Liberals have recently considered relief for miners operating in the province.

During Roundup, Minister of Energy & Mines Bill Bennett again reiterated a plan to allow miners to defer payments to the government on operational power at mines until commodity markets bounce back.

Aside from the economic uncertainty there are also questions in B.C. surrounding land-access issues, and the dynamic between government, industry and First Nations. The AME BC has zeroed in on the issue, and held featured sessions on the topic at the conference.

“For our part we focus on access to land for explorers and assuring there is the framework in place to allow for discovery and development,” Dirom said. “We’ve engaged the provincial government on the land access issue in a number of ways. There’s definitely a need for collaboration between ministries and stakeholders, because these are cumulative issues.”