Mining companies will meet at the industrys biggest conference next week under the darkest cloud in a decade, but a recent bounce in the price of gold and silver and a trickle of investment and acquisitions are starting to pierce the gloom.
The renewed optimism may set up a fierce competition for funds among small explorers who have woken from years of hibernation and now appear to be gang rushing a small, wary group of investors.
A Reuters survey shows that a majority of the small, Canadian-listed miners that help drive global mineral exploration expect to drill this year.
The same companies appear to be counting on an influx of funds first. More than half of the Toronto Stock Exchange (TSX) and TSX Venture (TSX-V) miners and explorers that participated in the Reuters survey said they were very likely to seek financing in the coming 12 months. A majority also are at least somewhat likely to announce a merger of equals, often looking to tie up with a better-heeled rival.
The investment thaw so far is limited to bigger, cash-generating producers of metals and minerals who have embraced costs cuts and profits above all else, as well as a handful of smaller miners with high-quality, low-risk projects.
The smallest explorers, the so-called junior miners, who need funds the most, may have the toughest time finding them as investors, smarting from three years of losses, only consider backing the best projects.
Lower metal prices, runaway costs and colossal financial writedowns had caused investors to flee big and small names after a near decade-long mining boom fueled by Chinas hunger for raw materials.
It is very tough and I dont see it loosening up any time soon, said Gorden Glenn, interim chief executive at Auriga Gold Corp, a tiny gold exploration and development company with properties in Manitoba.
Without revenue or investment, the only option is cutting costs, said Glenn, who has not drawn a salary from Auriga in 18 months.
Against this backdrop of uncertainty and hope, some 30,000 people are expected to gather in Toronto next week at the Prospectors and Developers Association of Canada convention, or PDAC, the industrys largest annual convention and a showcase for mineral explorers and developers.
The fortunes of many miners are tied to the price of gold, the most popular mineral exploration target, which has risen 10 percent this year to $1,331 an ounce as of late Thursday.
That is a sharp turnaround from a 28 percent slump last year when bullion experienced its first annual decline in 13 years, although it had been trending lower since hitting an all-time high around $1,920 in September 2011.
Thomson Reuters GFMSs forecasts prices to average $1,225 an ounce, 13 percent below 2013, however.
The risk is that you always tend to have a little bit of a better market early in the year, said Kerry Smith, a mining analyst at Haywood Securities in Toronto.
While bullions rise has helped to lift the Toronto Stock Exchanges S&P/TSX Global Gold Index of bigger producers a whopping 28 percent this year, the exploration-heavy junior market, the TSX Venture Exchange, is up just 9 percent creating what Smith calls a bi-polar market.
Theres no way were out of the woods yet because things are still bad. But we have crawled off the bottom and were on our way up, said John Gravelle, the head of global and Canadian mining at consultancy PwC in Toronto.
The pain endured by mining explorers, who also hunt for minerals such as copper, uranium, diamonds and rare earths, is plain to see on the TSX-V.
A quarter of the listed miners for which Thomson Reuters data is available had less than C$100,000 ($89,700) in cash and short-term investments at the end of the third quarter of 2013. That is far below the half a million dollars it takes just to keep such a company open for a year without exploration activity.
Over the past three years, equity raised on the junior market tumbled 78 percent to just C$1.28 billion in 2013.
Yet optimists point to signs of renewed investor interest.
Trading volumes on the TSX-V were 20 percent higher in December and January compared to last years monthly average, a positive sign according to TSX-V president John McCoach.
In my opinion trading volumes are a very good leading indicator of future financing activity, he said. Mining companies comprise 60 percent of listings on the TSX-V.
Several small miners including North Arrow Minerals Inc , Santacruz Silver Mining Ltd, Torex Gold Resources, Lydian International and Cancana Resources Corp have managed to raise money in the past two months.
A lot of people have gone oh, theres no money in this market. Well I think theres money for good projects theres not stupid money anymore, said Marc Leduc, chief operating officer of Lydian, a small gold explorer that raised C$15 million this month.
McCoach said that mining juniors are a resilient group partly because many of their management teams have lived through previous down cycles and learnt to survive by cutting spending to the bone.
The most dire years in recent industry memory are those following the collapse of Bre-X Minerals in 1997, a period miners termed a nuclear winter, as investors fled the sector after the Canadian companys self-proclaimed spectacular gold find in Indonesia was exposed as a fraud.
Fewer than 15 companies have delisted from the TSX-V in each of the past three years due to falling foul of listing requirements or at the companys own request.
I dont want to diminish the challenge that a lot of them have had in the past two years. But the failure rate has been nothing like what some of the pundits have been predicting, McCoach said.
The Reuters survey was conducted in late January and early February, online and on the phone. A random sample of TSX and TSX-V mineral exploration companies were asked to participate.