Although the tough times are far from over for the embattled Canadian mining sector, there is at least one reason for cautious optimism.
For the first time in three quarters, EY's Canadian Mining Eye index – a collection of Canadian exchange-listed mid-tier and junior firms with market cap's ranging from $1.4 billion to $55 million – improved.
According to an EY report, released last week, the mining index climbed 5% in the third quarter of 2013. The jump mirrored gains in the S&P/TSX composite index, which also grew 5% in the third quarter, and the London Metal Exchange, which increased by 7%. The price of gold price was up 9% over the same period.
EY's index, however, remains down 50% in the past 12 months.
"On a relative scale, it's positive," said Jay Patel, EY's Canadian mining and metals leader.
"But there remains a real focus on cost management at the moment to continue best as possible in the current environment."
Vancouver-based Ivanhoe Mines Ltd. (TSX:IVN) was among the index's most successful companies. Ivanhoe gained 45% in the third quarter, spurred by a proposed two-stage development of its Kamoa mine, a large-scale copper deposit in the Democratic Republic of Congo and continued work at its Platreef project in South Africa.
Platreef, a nickel and copper deposit, is on the northern end of the Bushveld Complex – a mineral -rich area in South Africa that's home to more than half of the world's platinum.
Notable instances of fundraising in the third quarter included Vancouver's Pretium Resources Inc. (TSX:PVG), which raised $25 million from two private placement deals in September. The company plans to use that money at its Brucejack project in northwestern B.C.
According to a feasibility study completed in June, Brucejack is expected to produce 7.1 million ounces of gold over 22 years.
Atico Mining Corp. (TSX-V:ATY) raised 27.4 million in the third quarter – $8 million via a debt offtake agreement and $19.4 million from equity financing. The company plans to use the money to continue exploring the El Roble mine in Colombia. El Roble is a producing copper-gold mine, but Atico is exploring the property to find more resources before it buys the mine.
Igor Dutina, investor relations officer with Atico, told Business in Vancouver that raising money is difficult in mining's current economic climate but his company benefitted from having an established pool of institutional investors that have been with the company since its initial public offering in March 2012.
"It is an absolutely challeng ing time to raise money – there is no question about that," said Dutina.
"But there are some unique opportunities for investors, it isn't all doom and gloom. We were very lucky to have a strong institutional investor base. The majority of what we raised came from them."
Out of the 100 Mining Eye index companies, 59 companies had net gains in Q3 2013, compared with four in Q2 2013.
Market exits from the Mining Eye index:
- Strathmore Minerals: delisted from TSX after being acquired by Energy Fuels (TSX:EFR)
- Cobriza Metals: delisted from the TSX-V after being acquired by Candente Copper (TSX:DNT)
- Patagonia Gold: delisted from TSX due to limited trading volume
- Azimuth Resources: delisted from TSX after being acquired by Troy Resources (TSX:TRY)
- Kenai Resources: delisted from TSX after being acquired by Serabi Gold (TSX:SBI)
