Spike in gold price among highlights of 2002 Retrospection

The previous occupant of the editor’s chair here took to naming years for their characteristics. It was a useful way to encapsulate the mood of the year past, a metaphor for what fate dealt out each trip we took around the Sun. The practice started in 1997, the year of the junior-mining crash.

Scandal-ridden 1997 was the Year of the Gilded Reptile. This shiny critter, who resembles a Komodo dragon or maybe a large Gila monster, is indigenous to the western United States and the Indonesian Archipelago, but specimens have been seen on most stock exchanges. As junior companies that explored in Southeast Asia in those days found out, his bite can prove fatal.

We christened 1998 the Year of the Rampaging Bear. Rampaging, it seems, didn’t take a whole lot out of him, as he continued doing it through the next two years. All in all he took a long time to knock himself out. Pay no attention to that scratching you hear at the door. He’s just looking for garbage, which he found in abundance in those days.

The next year was the Year of the Timid Turtle, when the industry just kept its head in and its eyes shut. The dot-com mania was at its height, and Internet startups simply vacuumed up the venture capital. From the late-2002 vantage point, it’s hard to imagine just what kept the bulls going, as the bears kept pointing out how ridiculous valuations had become, but believers only give up, it seems, when buyers disappear completely.

That was also the year of the one-month adrenalin rush, when gold briefly touched US$340 per oz. following the signing of the Washington Agreement by the European Central Bank, its member banks, and three other large European official-sector holders. The magic didn’t last — probably fortunate for Ashanti Goldfields and Cambior, which found themselves engulfed by a flash flood of margin calls — but anyone who likes measuring progress by examining the “what-ifs” should consider what might have happened to the junior golds if the price rally hadn’t taken place. We might still have seen a gold recovery this year, but it might have brought us to US$240 rather than US$340.

So when 2000, the Year of the Survivor, came round, the industry was alive, if a bit battered, grievously undernourished, and badly dressed, sort of like Richard Hatch but not as wealthy. Spearfishing, a favoured pursuit of many Survivors, was big that year, as the first big takeovers took place — Phelps Dodge took out Cyprus, Grupo Mexico swallowed Asarco, Rio Tinto picked off North, and Billiton swept up Rio Algom.

That brought us to 2001, which we didn’t even try to name. The mining business kept grabbing for traction and finding none, and when the terrorist attacks of September happened, the capital markets, which had finally given the dot-coms and telecoms a long-justified pounding anyway, flattened everything.

The past year opened with the battle that created yet another World’s Largest Gold Producer. (The editor here has to keep track; he answers the phone, too, you see, and when someone we don’t even know calls out of the blue to find out the world’s-largest-whatever, it’s important to have a quick answer.) The combined forces of Newmont Mining and Franco-Nevada Mining were just too much for AngloGold in a takeover contest for Normandy Mining. But it’s notable that this was not the great year of consolidation in the gold industry, Placer Dome’s takeover of Aurion Gold notwithstanding.

Fact is, after the business combinations of 2000 and 2001, many of the big boys in both gold and base metals are digesting their catch, rather than looking for something else to swallow. It was, it seems, the Year of the Dyspeptic Anacondas. (There is no need to seek for further explanation for the failure of the mining world’s more directionless companies to become takeover bait.)

The misery in the financial markets finally put a fire under gold prices, always an important driver for the junior exploration market. Most of all, the hedger camp among gold producers saw some very public defections, and spot buying by the reformed hedgers ran the price higher still. We’re a long way from the days of the gold bubble — a good thing too — but the depressed gold market of the late 1990s may at last be behind the mining industry.

Inco finally got assurance of a lease on the Voisey’s Bay nickel deposit in 2002, but promptly wrote down about US$1.5 billion in the project’s carrying value. The Most Exciting Mineral Deposit In All the Universe and Beyond, or whatever Brian Tobin called it, is now expected to go into production in 2006.

We did see one trend this year, and it’s heartening: there were some big new discoveries. It had become a commonplace in the business to malign Barrick Gold’s exploration effort, but the discovery at Alto Chicama in Peru put the lie to that conventional wisdom.

Continuing exploration success in Mongolia — the highest-profile results coming from Ivanhoe Mining and its partners — showed how the “emerging” countries offer big potential, while several hot holes from the Prominent Hill property in South Australia showed that established mining countries can still excite. If future access to capital will depend on discovering some new big deposits, there’s a start for you — as long as nobody hypes something into another Voisey’s Bay.

It’s been a long recession. What will bring us out? Maybe prices, maybe discoveries. But the rise in the gold price, and the shakeout in the world economy, are both signs that hard assets are beginning to look better again.