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The Gold Sector Attempts to Reverse the PDAC Curse as Market Consolidation Continues
The annual Prospectors & Developers Association of Canada (PDAC) conference is a significant event for mining companies to network with potential investors, suppliers, and consultants. It is also an excellent indicator of sentiment in the gold industry. The PDAC week is known for a flurry of news releases leading to an inevitable news drought following it. This year, the PDAC Curse appears to have arrived early, with the mining sector experiencing a 32-month consolidation of outsized 2020 gains.
Last Tuesday, the Federal Reserve Chairman Jerome Powell impacted the gold price by $35, jawboning it lower with his threats of “higher-for-longer” interest rates, which shifted investors to the US dollar. The mining space is waiting for the consumer and producer price indexes to be released next week, which could impact the gold price significantly.
Although the upside momentum has recently waned, the strong January number of Non-Farms Payrolls (NFP) reports surprised market consensus, which expected the rate to remain the same. Gold futures have reclaimed the earlier $35 loss, and the Gold/S&P500 ratio is moving bullishly higher.
Many CEOs of junior developer and exploration firms are hesitant to commit more capital until they see some clarity in the sector. However, M&A has returned to the depressed junior space, with several prospective deals publicized this year. In fact, Cerrado Gold (CERT.V) recently entered into a definitive agreement to acquire Voyager Metals Inc. (VONE.V) in an all-stock deal.
The Canadian government has also taken steps to speed up the time it takes for mining project approval, aiming to cut four to five years off the current time frame. The mining industry is in dire need of more consolidation, and a faster track to production being recognized in juniors takeover targets would likely speed up the process.
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