Let’s start by looking at exploration financing, the trends, who’s getting investment now, and what you see that sets TSX listed companies apart from others.
The TSX/V is the largest mining exchange in the world, so that’s what separates it from everyone else. It also in Canada, and we have flow through financings, flow through shares, which I think gives us a huge advantage for exploration in Canada. Also regarding the TSX, the regulatory commission that they have ensures that things are done fairly well, combined with the 43-101 requirements. So it has a number of safeguards built into it, which gives confidence to investors, a long history. I guess for the TSX, it’s not just Canadian listed but worldwide listed, but I guess people know it as the mining exchange of the world, especially North America by far. Then for the Canadian companies, it’s the ability to use the flow through share tax incentives for exploration and development. And that gives them a big advantage.
How do you think it looks for explorers for the coming year?
I think it looks quite good. We saw a drop off in exploration from about 2012 until 2018, 2019, and it’s picked up since then. But with the big push on the battery metals and the critical minerals, I think we are going to see an exploration push in that the majors can only buy so many of the companies. The mid-caps are looking for growth and they’re going to be looking down the chain to the explorers. And I think there’s still a lot of things to be found, but it’s going to be more difficult now, and will be more costly to find if you want to stick with safer jurisdictions and more stable environments.
As a follow-on, how do you assess what makes a stable environment?
History.
You do quite a bit on the gold side of the industry. Where do you see the gold price going, and how do you think this is going to have an impact on mining investment moving forward?
With the increased inflationary pressures worldwide, I think gold’s still very positive. The dollar will be devaluating. We need to preserve our capital, so it’s going to be through gold. So I’m still bullish on gold. Also we’re seeing cost increases for labour and consumables, everything all across the way, which is going to add more to inflationary pressure and cost of doing business. So the gold price will go up.
Mining has been increasingly coming under pressure from ESG advocates. What do you see as some of the roles and responsibilities for the industry moving forward on this front?
I think it’s a big part of the industry, but I think it has always been a big part of the industry. Companies act responsibly. A lot of money that you never hear about being spent is spent in local communities, local cities, local governments to help people. So it’s already being done, it may just not be publicized well. We have a tendency to focus on the negatives and not all the positives that the mining industry does such as contributing jobs, taxes, creating skilled workforce, etc. Environmentally as well, you have to do things right, and that’s the way it is these days.
We can’t be as dependent on single countries for all of our supplies
Do you see Canadian companies leading the way on this front?
I think so. We have very strict standards in Canada, and I think those get exported with the company when they go explore into different countries. Canada is still probably the leader in exploration development worldwide, so I think we do set a lot of the standards for that.
Are there set guidelines or anything that companies and investors typically follow with regards to environmental or social issues? Or is it just each investor making their own criteria that they use when assessing investments?
I think each investor has their own criteria that they will use. You have some ESG funds specifically, who will have their own guidelines of what they’ll use. I think every fund will be somewhat like that. I think every company also has their own set of rules that they will follow. You see a lot of the majors now coming out with ESG guidelines that they are publishing, which is something new in the last five years.
And what about the juniors?
We haven’t seen that as much from the juniors. It may just be more of a capital point because, don’t forget the juniors are typically still in the exploration phase, so their impacts are typically much, much lower than an actual mine. It’s typically just trudging through the bush with some drills.
Finally, do you see any kind of lasting impacts from the Russia-Ukraine situation globally?
I think one of the things is we can’t be as dependent on single countries for all of our supplies, and this is not just about Russia-Ukraine. Think about when COVID-19 hit. We all had mass shortages and testing kit shortages and vaccination shortages as well. We have to keep a healthy, competitive environment for all of these things. In the case of Russia and Ukraine, of course, Russia is a massive producer of platinum, palladium, cobalt, petroleum. So we have to look for alternatives and have other paths available and to supply the world chain as well.
Natural Resources Canada has set out guidelines for Canada’s own critical minerals supply chain. Do you think this idea of domestic supply chains is going to be growing in importance then?
I think it will just because it’s all part of electrification and the EV chain going forward. So we will be having more and more of those explored, and we will have more discoveries, and we need the processing for those rare earths, and to become less dependent on a single country. Right now we look at China, the DRC, and Russia as the key places for a lot of those metals and we need alternatives.
Any final words on the overall opportunities in Canada?
The main thing is that Canada has the right rocks. There is a lot of unexplored ground still in Canada, especially in the north, and exploration is not easy and it’s not inexpensive. It takes time and it takes money to find these deposits, and somebody has to go on the ground and walk the ground, and there’s a lot of territory to be covered. And the footprint of a mine on surface can be very small. And you just have to quite frankly be very good, and I think you also need a little bit of luck with it, be able to find these.
So there’s still a lot to be found in Canada. We’ve got all the right rocks, the right ages. The potential here is for more. And we just need some good, hardworking, innovative individuals to get up and do the work.
Gary is the Managing Director, Mining & Senior Geologist at PearTree Securities and has over 40 years of industry experience as a mining analyst/geologist. He has spent the past 19 years in capital markets and over 20 years in the mining industry. Gary’s analytical focus has been on small to mid-sized exploration, development and production precious metals companies.
