Categories: Precious Metals
Topics: General Precious Metals

Sprott's Thoughts: The State of the Sector

Sprott's Thoughts

The State of the Sector

Conversations and conferences of late have reinforced a few factors that define today’s young mining bull market. 

Majors Are On the Hunt

Talking to executives from junior companies, one comment just keeps surfacing: they are seeing overwhelming interest from majors. What that means is major miners – Newmont and Barrick and Goldcorp and Agnico, etc. – are meeting these junior companies to assess their projects, with an unmasked eye towards making deals.

The amount of interest makes sense. It’s been over a decade since major miners have looked down their project pipelines and found them bare. Sure, the blind focus on growing production (rather than making money…) meant the big boys were still making deals late in the last cycle, but in general those deals added big assets to portfolios already brimming with smaller opportunities.

Now, after selling almost everything to survive the bear market, majors need to start restocking the pipeline again.

Usually that process starts with new production and near-development stories, but there just aren’t very many such assets around. The bear market derailed so many projects that only a small number are ready to be built or are newly operational. Majors are circling these opportunities but, because they know competition will be stiff, they are also going straight to exploration-stage opportunities.

This theme was overwhelming at a recent conference. Every junior – from project generators to single asset explorers, from companies focused on North America to those with assets in Eastern Europe or South America – every one spent more time meeting with majors than meeting with investors. The majors were there with big teams and those teams clearly had mandates to look high and low for opportunities.

This theme was overwhelming at a recent conference. Every junior – from project generators to single asset explorers, from companies focused on North America to those with assets in Eastern Europe or South America – every one spent more time meeting with majors than meeting with investors. The majors were there with big teams and those teams clearly had mandates to look high and low for opportunities.

This kind of major interest matters, but don’t expect a wave of M&A. Instead, we are going to see a wave of partnerships – joint ventures and equity investments that give majors a foot in the door with assets they like. And while such deals aren’t as exciting for the market as takeouts, they are important because they make it possible for juniors to advance their projects quickly and to focus on exploration instead of where and how to find capital.

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