Issue link: http://resourceworld.uberflip.com/i/759903
D E C E M B E R / J A N U A R Y 2 0 1 7 www.resourceworld.com 7 view companies and their prospects, with long-term prospects or portfolios dis- counted. PricewaterhouseCoopers (PwC) identified this effect in its Mine 2016 report as "spot mentality." A related mentality haunts stocks, whereby moves in a share price provoke a collective reaction, particularly on the downside. "Algorithmic traders just see bad news and dive in, selling stock they don't have. The longs also see this news, note the subsequent pressure and sell. That's why you get these massive cas- cades," Kaiser said. The recent run also belied the sector's ongoing struggles, with the seniors still recovering from misguided acquisition strategies executed during the resource supercycle. Concerns remain over the debt loads this helped create, while the responding divestment and mothballing of marginal assets has continued. PwC high- lighted the sale of the Tenke copper project by Freeport McMoRan Inc. [FCX-NYSE] for $2.6 billion and the sale by Anglo American Plc. [AAL-LON] of its Brazilian niobium and phosphates business for $1.5 billion as some high-profile examples this year. But refocusing on core business and cre- ating value are signs the seniors have taken the right medicine; Ernst and Young's Q2 Canadian Eye noted how the likes of Barrick Gold Corp. [ABX-TSX, NYSE], Northern Star Resources Ltd. [NST- ASX], Newcrest Mining Ltd. [NCM-ASX], Agnico Eagle Mines Ltd. [AEM-TSX, NYSE] and Detour Gold Corp. [DGC-TSX] were reaping benefits from reduced all-in sustaining costs, helped along by restruc- turing, deleveraging, cost cutting and optimization programs. President and CEO of Sprott US Holdings, Rick Rule, also noted the improved performance, adding that cap- ital-constrained behaviour was healthy and that prudence might lay foundations for positive outcomes. "I suspect we could get a couple of years of sobriety and, if that happens, the industry may surprise on cash generation for several quarters in a row." Prudence will also benefit those juniors advancing first-class projects as seniors pay top prices for the best acquisitions and the work undertaken to define and de- risk. "As a consequence of the diminished risk appetite among the majors, a project will be bought by a major for fairly eye- popping prices when a junior de-risks it," Rule said. OTher issUes Many of the long-standing problems affecting the juniors rumbled on in 2016. For example, Kaiser Research was track- ing 1,437 companies effective November 2, with 222 listed as having market capital- ization rates of under $1 million, while 642 companies were trading below 10 cents per share. Kaiser Research also tracked a rise in financings during gold's move higher, noting a retreat after the yellow metal weakened. "Some financing activity was done after June but everything kind of froze by mid-August and we've been back into a bear market since August," Kaiser said. Rule was disappointed that many unfit juniors had clung on, destroying value with their continuing presence. "If you have something like 1,000 superfluous list- ings, with each one consuming $500,000 a year in general and administrative expenses at a minimum, it means the sec- tor is consigning $500 million a year to