PDAC ’14: A mood shift as paper plays fall to the ground

By Siobhan Lismore-Scott
Published: Friday, 07 March 2014

Serious business discussed as offtakes, aboriginal matters, at the forefront

Graphite, lithium, rare earths and potash companies were among the industrial minerals companies which gathered in Toronto this week for the Prospectors and Developers Association Canada (PDAC) congress.

There was, without a doubt, an extreme shift in sentiment on the floor. Although there were fewer attendees — this year 25,122 people attended, compared to 30,147 attendees in 2013 — and less exhibitors, the mood was decidedly less gloomy.

Not only were attendees more upbeat, but the level of engagement was more serious. Developers in the industry can no longer get away with claiming to be the biggest and the best in the industry without backing up their claims with cold hard facts.

So this year several companies held press conferences about offtake agreements, joint venture partners, and agreements with local communities.

“Everybody in the mining industry recognises that there are two types of play: a paper play and a mining play,” Ricardo Campoy, managing director of minerals capital advisory service, Headwaters MB, told IM.

And, after what has happened with the economic downturn, you recognise people focused on the paper play and not the mining play. They are both important – but if you favour the paper play your mine will run into serious problems,” he added.

Serious business

It was the PDAC for announcement and strategic partnerships. This kicked off at the media reception with president of PDAC Glen Nolan introducing John Baird, the Canadian Minister of Foreign Affairs, who gave a speech about the importance of networking and promoting the Canadian resource sector.

Nolan emphasised that the Canadian mining and resource industry could provide growth for the economy and strategic links with other countries also.

This was highlighted by the strategic partnership between the Toronto Venture Exchange and the Santiago Stock Exchange, which was announced the following day.

And then, the announcement by Avalon Rare Metals in which it revealed its tolling agreement with Solvay, put the company back in the so-called rare earths race.

The presence of the Canadian Premier, Stephen Harper, highlighted the importance of the mining event — but also, if one was to read between the lines, the need for a boost for the mining industry.

Also announced while at PDAC was Orbite Aluminae Inc.’s cash injection from the Quebec government of Canadian dollar (C$) 10m ($9m*).

“This brings us a strong strategic partner and what was more important is that that investment was based upon a technical survey carried out by an independent company,” CEO, Glenn Kelly, told IM.

Elsewhere, Focus Graphite president Don Baxter spoke to IM about the company’s strategic Chinese partner, shortly before it announced the offtake amount it had agreed for the Lac Knife deposit was for a minimum of 200,000 tpa – half its output, over ten years.

“We announced an offtake agreement with a Chinese conglomerate before Christmas and it had a very positive effect on Focus,” Baxter told IM.

“It definitely puts us ahead in the graphite space, being the only company to do that and the only one in history to do that – deal directly with an end user and the fact it’s a Chinese end user for minimum half of our production, but they could take 90% of our production. So it’s had a very positive affect and spurred some of the other we are speaking to come to the table as well as they are concerned there won’t be enough of our high quality flake for them and having the offtake answers the question that all people ask when having graphite – can you sell it? Absolutely,” he added.

Aboriginal matters

Tellingly, this year many companies were also keen to highlight their connections with the communities they were mining near.

Avalon hosted a signing of a participation agreement with the Northwest Territory Métis Nation, which lives on the land which contains its Nechalacho Rare Earth Elements Project at Thor Lake, NWT.

This saw National Chief of the Assembly of the First Nations, Phil Fontaine, saying that Avalon was a leading example of how a mining company should conduct itself with regard to the aboriginal community.

“One of the reasons I decided to join the board of Avalon was because of what I knew about Avalon and the way it positions itself with the community,” he told IM.

PDAC hosted a whole session on aboriginal affairs and there was a television crew engaging with mining companies to enquire as to how they comported themselves in their respective communities.

Not all were forthcoming, however, producer Candida Paltiel, told IM.

“We try to speak to everybody and mostly they have been great, but some don’t want to know at all,” she said.

Looking to 2015

For once – and refreshingly so — there was little talk of the future being bright, or expected optimism for the future.

This year’s PDAC was different because of the positive signals from the market, such as Tesla building a Gigafactory in the US, the Canadian Parliament meeting with rare earths industry group CREEN to discuss a strategy for the year ahead, and the many offtake agreements and partnerships announced over the four day period.

This is an industry which looks like it needs to knuckle down and prove its credentials if it is to survive and so 2015 looks like hard work, with a goal in sight.

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