Editorial: A pit stop at the halfway point

The Canadian mining industry staggered and gasped to complete the first half of 2013, a little dehydrated and cramped, and trying to summon the strength to get through the rest of the year in competitive shape.

The difficulty for Canadian miners in the first half is writ large in some of the major stock market indexes: while the S&P/TSX Composite Index fell 2.4% to 12,433.53 points between Dec. 31 and June 28, the S&P/TSX Global Mining Index had tumbled 28% to 63.45 points.

The precious metals subsector took it hardest, with the spot prices per ounce for gold, silver, platinum and palladium closing on June 28 at US$1,192, US$18.86, US$1,317 and US$643, or down 28%, 37%, 13.5% and 8% for the first half of the year, respectively.

The high degree of leverage to precious metal prices that precious metal stocks enjoy in the good times cuts both ways, of course. And so we saw the S&P/TSX Global Gold Index cliff-dive 44% to 170.40 points in the first half of 2013. On the NYSE-Arca, without the cushion of a falling Canadian loonie, the Gold Bugs Index plummeted from 444.22 points to 228.09 in the first half — an astonishing 49% decline in just six months.

The base metals subsector was hanging tough by comparison, with the S&P/TSX Global Base Metals Index slipping 22% to 96.57 points.

Do you even want to look at the TSX Venture Composite Index? It fell from 1,221.30 points to 881.40, or down 28% — which actually smoothes over the abysmal performance of quite a few individual mining stocks.

While the final tally for mine financings in the first half is still being calculated, anecdotally it looks to have been one of the driest periods in years, with some old-timers reaching back to the recession-plagued early 1980s for comparables.

And yet, in a testament to the mining community’s resiliency, money is still being raised, with a notable uptick in more creative deals involving gold and silver streams, supplier financings, rights offerings, non-core asset sales, majors buying small stakes in junior explorers and the renegotiation of deadlines and other terms in joint-venture agreements to relieve financial pressure.

• Anyone who’s ever walked across a raw, natural landscape in northern Canada several weeks after a forest fire will know that unmistakable feeling that everything around you has hit some kind of primitive, base level from which new life has already started to crawl and sprout from the ashes.

Canada’s diamond sector has a bit of that feeling these days. After many years of high-risk exploration dollars being thrown at remote areas with little to show for it, and quite a bit of corporate uncertainty around the country’s major assets, we’re now seeing a stable foundation.

There’s been the shakeout of the more ill-conceived projects. For instance, Shear Diamonds’ doomed 2010 effort to revive the Jericho diamond mine in Nunavut has been played out, with the abandoned property reverting to the federal government’s Contaminated Sites Program.

Dominion Diamond, formerly Harry Winston Diamond, has emerged as the lead Canadian diamond miner, parting ways with its fancy-pants jewellery division and taking over BHP Billiton’s majority operating interest in Ekati in the Northwest Territories.

Some thought Dominion might sweep the board this year in Yellowknife and pick up its partner Rio Tinto’s stake in Diavik. But the major had a change of heart, and has officially taken its global diamond assets off the auction block. Rio Tinto says it sees “robust” medium- to long-term fundamentals for diamonds, underpinned by growth in luxury goods in Asia and strong demand in North America.

In line with its renewed optimism on diamonds, Rio Tinto has kicked off a new consumer advertising campaign for Nazraana, its flagship marketing initiative to promote affordable diamond gifts in India.

Elsewhere in Canada, the news is also positive, with the Gaucho Kué project in the N.W.T. getting a hefty resource boost, Shore Gold still sitting on its monster deposits in Saskatchewan, De Beers going ahead with further development of the Victor diamond camp in Ontario, Stornoway Diamond making progress building the Renard mine in Quebec and Peregrine Diamonds busy exploring its geologically compelling project on Baffin Island.