PDAC 2024: Five things to keep in mind

Breadcrumb Trail Links Mining Lithium off the front burner as…


Lithium off the front burner as PDAC 2024 gets underway

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The shift from lithium to uranium, the confusion about Chinese investments in Canadian companies and the hunt for new mining frontiers are just some of the issues expected to dominate discussions as roughly 23,000 participants attend one of the world’s largest mining conventions this weekend in Toronto.

The annual Prospectors & Developers Association of Canada (PDAC) event serves as a platform to discuss potential deals, investments and even ways to smooth supply-chain kinks.

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Here are five broader issues that are likely to be hot topics on the convention floor.

The battery slump

Unlike 2023, miners aren’t likely to be as excited about projects that contain metals such as lithium, nickel or graphite that are needed to build batteries due to the falling prices of these commodities.

The prices of battery metals climbed manyfold in 2022 and 2023 on the expected rise in demand for electric vehicles amidst the energy transition away from fossil fuels. But, prices have plummeted in the past year due to an increase in supplies, subdued Chinese demand and a poor EV market. For example, the price of lithium carbonate is down more than 70 per cent from the same time last year.

“Everybody was lithium, lithium, lithium. It was a big focal point (at PDAC)” said Mark Selby, who heads Canada Nickel Co. Inc. “We don’t really have a big flavour-of-the-month metal happening now.”

Canadian miners that are more focused on exploring and developing projects into mines, as opposed to producing the minerals, mostly depend upon investors for a constant flow of money. But falling prices have driven investors towards commodities that are on their way up, which has forced some battery metal miners to either stop exploration or focus on other commodities that are more likely to bring in money.

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“It’s such a fickle little industry,” Michelle DeCecco, vice-president of Calgary-based Lithium Chile Inc., said. “They drop you so quick. Everyone is really quick to move to the next thing.”

That “next thing” is likely to be uranium, which has been on the rise since 2021. In January, the commodity hit its highest spot price since 2007.

However, not all miners shift their focus according to the price cycle. Companies with more advanced projects — such as Canada Nickel or Lithium Chile — are sticking to their plans and waiting for prices to rise again. For them, these conventions are sources of investments and funding from the government.

Despite the pricing slump, however, interest in these metals is likely to continue growing in the long run, according to Dean McPherson, who heads the global mining team at TMX Group Ltd.

Gaining clarity on China

At least three Canadian miners have recently inked deals with Chinese investors. These deals could be used as a jumping-off point to better understand investment limits regarding China since Canada has tried to distance itself, in the past two years, from the Asian giant, which dominates the mining world.

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Montreal-based SRG Mining Inc. agreed to sell 19.4 per cent of the company to Carbon One New Energy Group Co. Ltd.; Vancouver-based Solaris Resources Inc. inked an agreement with Zijin Mining Group Co. Ltd. to receive $130 million by way of a private placement of common shares; and Vancouver-based Osino Resources Corp. agreed to be bought by Yintai Gold Co. Ltd. for $368 million.

The completion of all three agreements will depend upon the federal government’s approval based on the Investment Canada Act.

In November 2022, Canada ordered three Chinese companies to divest their shares from three Canadian lithium miners. This was after Ottawa released a policy that made it more difficult for foreign businesses either owned or influenced by “non-like-minded” nations to own or invest in Canadian miners that dealt with critical minerals such as lithium, copper and nickel.

These three minerals along with 29 others are considered critical because of the key roles they are expected to play in the gradual transition away from energy produced from fossil fuels. The restrictions were imposed to ensure Canada lessens its dependence on China for these raw materials. The move also seems to be a part of a wider goal by the United States and Canada to rely more on friendlier nations.

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Investments from foreign companies are also investigated by Canada even if they don’t include minerals that are not considered critical, such as gold.

McPherson said the “internal focus this year will be on these deals to gain clarity on the Investment Canada Act.”

New frontiers

Miners have long spoken about the need to explore new regions for projects as the demand for critical minerals rises.

Getting a proper licence to operate in a region ranks No. 3 among the risks miners are concerned about, according to the annual EY Canada survey published in October. Miners require the licence to operate on land they don’t own, and navigate a range of conditions around how minerals are extracted.

For example, Mining giant Barrick Gold Corp. is looking to build a copper mine in Pakistan and seeking to expand its small presence in Saudi Arabia — both non-traditional mining destinations.

With country-specific presentations dominating the fourth day of PDAC — ranging from India to Saudi Arabia — Canadian explorers may be intrigued to explore their horizons.

“As investment capital continues to grow globally, expect more active market participation from new sources,” McPherson said. “The Saudi Arabia presence at PDAC underlines the expanding pool and opportunities in mining.”

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Interest from car and battery makers

As far as mergers and acquisitions are concerned, this year’s convention could be a starting point for potential alliances with original equipment manufacturers, Theo Yameogo, EY Americas and Canada mining and metals leader, said.

Several battery and car makers are hoping to create partnerships with miners that can supply them with minerals such as lithium, nickel and graphite.

In February, Saint-Michel-des-Saints, Que.-based Nouveau Monde Graphite Inc. inked deals to supply General Motors Co. and Panasonic Holdings Corp. with graphite, which is required to make anode materials in electric-vehicle batteries.

Canada Nickel’s Selby believes there could be more deals discussed this year at PDAC.

“Despite all the negative noise about the EV hype being all over, the reality is that the market is still growing at 30 per cent per year,” he said. “You have got a bunch of car companies, battery-supply-chain companies all in town.”

Government incentives

PDAC recently released its policy recommendations for the upcoming federal budget. Its No. 1 recommendation? That the government renew the Mineral Exploration Tax Credit (METC), which creates a 15 per cent tax credit when an investor’s funds are directed toward greenfield exploration — that is, making new discoveries of mineral deposits.

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Ottawa’s five-year extension, announced in 2019, is set to expire at the end of March.

That and other tax credits are crucial in attracting investors to the junior mining sector, said Jeff Killeen, director of policy and programs at PDAC.

“Those are the fundamental pieces that prop up Canada’s mineral industry,” he said. “Those are the fundamental pieces that build out our financial ecosystem and allow those junior companies to access capital.”

In past years, the federal Liberals have sent top ministers to the convention, including Prime Minister Justin Trudeau, to make announcements and discuss tax credits.

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Killeen said he “likes” the prediction that the Liberals could send someone this year to announce a new five-year renewal of the METC. Minister of Natural Resources Jonathan Wilkinson is scheduled to attend several events at PDAC this year and make some as-yet-undisclosed announcements.

— With files from Gabriel Friedman.

• Email: nkarim@postmedia.com

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