All it took was a mining revival Go west, again

Vancouver’s Mineral Exploration Roundups have, for the past several years, been the most optimistic of the mineral industry’s get-togethers.

Sometimes the optimism has grown out of a discovery — for example, the land rush that surrounded the Otish Mountains diamond discovery two years ago. And there is always the Howe Street factor, that upbeat attitude that makes venture capitalism work in Canadian venture capitalism’s home park.

While Bay Street may bill itself as the world’s mining finance capital, Howe is still junior mining’s main street. A quick look at the figures tells you there are almost three times as many publicly-listed mining companies in Vancouver as in Toronto; about ten times as many as in Calgary or Montreal; and almost twenty times the number in Denver. Save Teck Cominco, Placer Dome, and a few mid-tiers, Vancouver’s mining companies are overwhelmingly junior explorers.

Seen from our lookout on the muddy Don, Vancouver’s primacy in junior mining has its roots in the Windfall scandal of 1964. Legend has it that the Toronto-based juniors decamped en masse for the Lower Mainland after the Ontario Securities Commission clamped down on the market abuses of the time. It is true that the Vancouver Stock Exchange, through the 1970s and 1980s, was often seen as a rowdy and frequently dangerous capital market. The flip side is that Vancouver-listed juniors made the great majority of the discoveries in those years; and the exchange worked diligently — sometimes more diligently than government regulators — to keep its junior mining board clean.

Then came the 1990s bubble, and the ugly aftermath, and for a while, it didn’t look good for Vancouver. After the junior-mining market crashed in 1997 and 1998, the Western venture-capital markets saw a long period of sluggish trading and low dollar turnover. Some people began to question the need for a venture-capital market in Western Canada.

That slowdown coincided with the consolidation of the exchanges themselves — the Vancouver and Alberta exchanges combining to form the Canadian Venture Exchange, and the Toronto Stock Exchange’s subsequent takeover of the Venture Exchange. In some ways, the Western markets’ brand disappeared with the old exchanges.

Added to that, unfriendly government policies in British Columbia had mining and mineral exploration in the province flatlining.

But what remained in Vancouver was one of those things industrial strategists always look for, but never seem to recognize when they trip over it: a centre of excellence. The city had kept a critical mass of mining talent, which wasn’t going anywhere soon — after all, mining was depressed everywhere else, too — and capable people are the backbone of any industry. When the tide turned in the capital and commodity markets, the talent was there to exploit the new opportunities. And it was hungry.

The recovery started slowly, around 2000, after the dot-com boom hit its own peak, and picked up steam through the next two years. Investors, stung by the bust in e-commerce, first pulled away from the venture capital markets, then dived for cover when the 2001 recession hit and even the blue-chip stocks were levelled. But money abhors low returns, and when cash proved disappointing in a low-interest-rate world, the punters began to trickle back. And it was around that time that the United States dollar began to weaken and gold prices started their climb back to US$400 an ounce.

Vancouver, and the mineral-exploration business, had waited a long time for a few stars to line up in its favour. But in the past year or so, rising metal prices, low interest rates, and weak returns in the equity markets have brought the money back to Howe Street.

Vastly more capital is being raised, and the old indicator has reversed: money has started to look for projects, rather than the other way round. There have been some discoveries to excite the market, for the first time in a long time.

Mining, and Vancouver, are trendy again. It’s nice to see.