"Among the larger miners, there was the constant drumbeat that profitable operations would come ahead of growth for the sake of growth. To hear 'Our new focus is on mines that make money' makes one wonder what the old focus was: 'Mines that lost money,' perhaps?"We all know that when gold gets back to $1800 an ounce or $1900, the miners – admittedly at the behest of large shareholders – will be out there once again looking for acquisitions. Why are they not looking for acquisitions now, when the market is depressed? Isn't this the time to be buying? A few are, but very few."
"A focus among presenters at the 2013 Denver Gold Forum was on reducing costs in an effort to demonstrate viability. This was reminiscent of the late 1990s. If this is the case, there should be a good opportunity to locate companies with good prospects."
"The overriding theme of the Denver Gold event could be politely summarized as an industry in transition, less politely, in decline. The major miners are rationalizing operations, reshaping and recalibrating their companies, 'getting smarter,' and focusing on all-in sustaining costs and cash flow while cutting dividends. This means shutting down or selling marginal operations, cutting production, high grading, slowing development and in many cases eliminating exploration. We know where this will lead – the eventual acquisition of profitable deposits, as well as a few desperation mergers."Although the focus on earnings is a positive development, it was tough to come away with a real reason to pony up some cash and buy many of the larger companies. There were, of course, a few exceptions."
"I came away rather optimistic that we will see a number of discoveries develop into economic deposits over the next few years. There are some solid professionals diligently working through the process of turning geochemical anomalies into profitable mineral deposits, a few of which will be significantly profitable. The hurdles between an anomaly and proven deposit include metallurgy, strip ratio and geology, plus infrastructure, jurisdiction and social and environmental realities. To this list we need to add the ever-increasing time required to execute the most basic of work programs, coupled with the lack of shareholder patience and knowledge about exploration and mining. We should expect many prospects and companies to fall by the wayside, while a few manage to survive."In addition to the obstacles noted above, the industry is faced with a difficult financing environment for such speculative endeavors. The high-volume, fast-money hedge funds and retail are, for the most part, burned out and licking their wounds. There is, however, a new source of capital entering the mining sector that is, as yet, untainted by the sector's previous excesses. Value funds see this as a down-beaten sector that could offer a bargain based on the lowered price-earnings ratios, technical reports and other financial metrics. I also noted a marked increase in private equity investors who claim to be seeking significant participation in mining ventures and activist roles on company boards. I suspect that if these new groups are extremely diligent in their research, they will do well as the mining companies come looking for assets in the future and the few stellar assets come into production."My intention was to come away from the two shows with at least one new company to add to the EI list – prices are down after all. The criteria were pretty straightforward: a simple, inexpensive operation that offered above average profitability and good exploration upside in a relatively stable jurisdiction managed by a competent group that can see the goal line. I was successful."
"High grade/high margin was a key theme – no surprise here with a focus on smaller high IRR deposits that have easier permitting runways and low capital expenditure (capex) requirements."
"Key attributes included capital allocation discipline, demonstrating strong leadership, presenting a coherent strategy (and sticking to it) and focusing on increasing value of the business on a per share basis," said Gray.
"We asked a number of companies if drilling costs had come down and the response ranged from 10-30% reductions. Despite these savings, the majority of the companies were sticking with the same exploration budget, but drilling more meters for fewer Dollars. The main reason for the decline in drill costs relates to the lack of financing for juniors that has resulted in few rigs active for the drilling companies and much more competitive pricing."