With junior miners continuing to struggle with financing, many market watchers have concluded that it’s a buyer’s market — if only investors can distinguish the quality companies from the ones that won’t last another year or two.
(See: Turnaround coming in markets and M&A wave to hit juniors this year )
“This industry needs to shrink by two-thirds in the next couple of years and come out leaner, cleaner and meaner,” says Mickey Fulp of the Mercenary Geologist newsletter. “This is Darwinism right now — survival of the fittest, and the fittest will survive because the world needs metals.”
The upcoming Prospectors and Developers Association of Canada (PDAC) convention in Toronto, therefore, offers investors an excellent opportunity to sift through the rubble of the TSX Venture Exchange — which has fallen 32% over the past 52 weeks — and home in on the bargains.
Just how does one do that at PDAC, which takes place from March 3-6 at the Metro Toronto Convention Centre, and last year attracted a record 30,369 attendees?
Mining Markets asked several PDAC experts to find out how investors can make the most out of PDAC.
1: Don’t pay for what you don’t need
PDAC has always been about juniors raising money to fund their work programs, and retail investors are an important part of the investor audience the association wishes to attract on behalf of PDAC member companies.
Although registration fees at PDAC can be steep, the majority of sessions that are most valuable to investors are absolutely free.
Fully one quarter of PDAC attendees register for a free Investors Exchange Only pass. That grants access to most of the attractions from an investor point of view, including the Investors Exchange, which houses booths of companies of all sizes; corporate presentations; and advice and market insight in the form of newsletter writer presentations. Investors also have access to the Core Shack, Innovation Forum, Prospectors Tent and some components of other programs, including the Aboriginal Program and all of the CSR Event Series sessions.
The main things investor-class attendees don't have access to are the technical sessions, which are geared toward professionals, and the trade show, where suppliers' and country booths are located.
While that means missing the very valuable Commodities and Market Outlook session (part of the “technical session”) that happens on Sunday afternoon, you can always get the short version in The Northern Miner or other media coverage.
(One option for full free access to the show is to volunteer at PDAC, however volunteer positions, which are popular with geoscience students, have all been filled for this year .)
2: Plan ahead
While PDAC is a great place to meet and quiz the management of the companies you're interested in, you have to find them in the investors exchange first. If you've never been before, the huge and crowded show floor of more than 580 company booths can be tough to navigate, says Peter Bojtos, a geologist and mining engineer who also organizes the convention’s newsletter writers forum (see “educational opportunities” below).
“It’s overwhelming when you get in that room,” says Bojtos, a geologist and mining engineer whose first PDAC was in 1976. “You really don’t know what to focus on, there’s just so much information — and that’s us who are insiders in the business, we have a tough time.”
Research the companies you’re interested in ahead of time, and highlight their booth numbers and locations on a printout of the floor plan (available here). Consider planning a systematic route up and down the aisles, Bojtos says, because you can lose your way and get sidetracked very easily in the crowd.
Last year, the PDAC introduced “mobi,” a new smart phone mobile convention guide or to help attendees navigate and plan their time at the show. PDAC’s chief operations officer, Lisa McDonald, says that downloaded to your smart phone ahead of time, mobi can be used to book meetings, build a schedule, and search for exhibitors. Free Wi-Fi Internet connection is available in the hallways outside of rooms on Levels 700 and 800, on Level 600, and on the mezzanine level.
Note that some investors exchange exhibitors may be at the show for only two days (“Session A:” Sunday and Monday, or “Session B:” Tuesday and Wednesday) instead of the full show. All core shack exhibitors are two days only.
Mercenary Geologist Mickey Fulp recommends also picking up your badge ahead of time if you want to avoid the long lineups at registration. Registration is open on Saturday, the day before the convention starts, from 7 a.m. to 6 p.m. on level 600.
3: Remember the basics
You may hear some juicy rumours or come across a hot stock tip at PDAC, but that's not a sound basis for investing in a junior mining company, says Bojtos, an industry veteran who has served as an independent director on the boards of many juniors.
“You really should understand the asset a little bit. Anything in the mining business is going to need to be a longer-term investment, so don’t buy on short-term, knee-jerk reactions.”
There are bargains to be had in the sector, but the trick is to distinguish between companies that are truly undervalued and those that have no value and will end up going bankrupt — especially in an environment where investors are likely to hear sales pitch after sales pitch.
“I think you've gotta take the pitch with a grain of salt and remember that these are all promoters and everyone has a story and probably only about 10% of those stories will work out,” Fulp says. “So look people in the eye, if you're a good judge of character you can kind of tell when you're being b.s.'d.”
Fulp advises investors to stick with companies that have enough money to last for the next year. “Financing is very difficult right now and I don’t think it’s going to get any better,” he says.
In that vein, beware of juniors involved in small, low-priced private-placement financings — less than $1 million at a price of a nickel or dime, Fulp says.
“Oftentimes, those are companies raising money to pay the rent and do their filing fees and pay some salaries, and they're on their way out.”
Fulp’s own approach starts with identifying commodities with price stability or the potential for rising prices, then looking for companies with the right share structure, people and projects.
Roughly 100 promising exploration and development companies are invited by the PDAC convention planning committee to make corporate presentations geared towards investors. The presentations run on Monday and Tuesday every 15 minutes from 10 a.m. to 5 p.m. Check the schedule here.
4: Make use of educational opportunities
PDAC isn’t just a chance to shop around for companies; it’s also a chance to shop around for advice.
For most investors, the newsletter writer presentations are the biggest draw at PDAC — a chance to get both big picture views of the market and the lowdown on specific stocks.
The newsletter writers that present at PDAC are invited to do so for a reason. Bojtos, the session’s organizer, weighs a number of factors when putting together his wish list of speakers. Popularity is a big factor in choosing speakers to invite (Rick Rule of Sprott Global Resource Investments draws the biggest crowd), but so are credibility and credentials and how topical the speaker is. Bojtos also tries to ensure a spread of commodities is covered, and that the speakers offer a mixture of approaches and areas of specialty (some are chartists whereas others talk about currency, for example) with representation from Canada, the U.S. and Europe.
“I try to make sure that there are a lot of newsletter writers who actually go on the properties — after all it is the PDAC. I want speakers who have actually seen the assets and know what they’re talking about,” he says, noting that Mickey Fulp and Brent Cook of Exploration Insights are two such speakers that are also very popular. “A lot of the listeners are technically competent people so I want technically competent speakers.”
This year, there are 19 newsletter writers speaking. Unlike other conferences, newsletter writers are not paid for their appearances at PDAC, which Bojtos notes is a volunteer organization.
Both Fulp and Bojtos note that the speakers welcome audience questions and are happy to talk after their presentations.
For investors who are looking for an in-depth introduction to valuation of juniors, the PDAC's Investment Fundamentals short course for investors is held every year on the Saturday before the show opens.
PDAC’s McDonald says the course is a great opportunity for investors to prepare for the investors exchange.
“It’ll really boost their ability to get the most out of their conversations with the companies that either they’re already investing with or to look at some new opportunities,” she says. There is a fee of up to $339 for non-PDAC members, and the course usually sells out. Check here for availability.
5: Be social
With 25 years of experience in the mining business, PDAC executive director Ross Gallinger says that before he joined the association as staff last year, he missed out on PDAC in some years because of the proliferation of business meetings that happen during, before and after the conference.
Indeed, with upwards of 30,000 mining professionals, promoters, investment professionals and investors gathering in one spot, there’s no better place to network.
“We hear from people who attend that one of the biggest things that PDAC affords is that networking component and I think that’s not only to people who are in the industry, but also for investors to tap into as well,” Gallinger says.
Whether you know a lot of people in the business or not, using social media to connect can broaden your network.
“You’ll notice Twitter is very active in the days leading up to the convention and the convention itself,” McDonald says. “Probably one of the biggest advantages to Twitter is you can learn about a lot of the satellite events that are happening around the convention.”
Anything related to the convention will be posted the official hash tag of this year’s convention: #PDAC2013, which is already seeing lots of tweets.
McDonald says she expects to see more “tweetups” (meetings arranged through Twitter) connected to PDAC, with the first such examples happening last year for the first time.
Or if you’re more interested in the traditional party invites and hospitality suites that have long been associated with PDAC, “pace yourself,” says Fulp, who advises going early and leaving early. “The worst thing you can do is wake up with a hangover on Sunday or Monday morning.”
Another rule: always wear your name tag, says Fulp — even at the parties. You’ll increase your chances of a serendipitous meeting.
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