Presentation Expanding in the Taroom Trough

Resource sector has lost its luster

Looking back to the 1990s, Kaiser said that times were good in the mining industry.

Several important discoveries garnered incredible attention, including Diamond Fields’ Voisey’s Bay nickel deposit, Arequipa Resources’ Pierina gold prospect and Bre-X’s now-infamous Busang discovery.

Despite tarnish from the Bre-X scandal, the resource sector remained strong through the 2000s. However, as the 2010s began, the market turned bearish. Kaiser’s presentation focused on the period from 2011 to now.

He detailed how funding in the sector began to decline at that time, with trading activity following closely.

“I’ve broken down the monthly financing activity for TSX Venture resource juniors by the value range. And you can see that in the past decade, it has really shifted to a small group of very large financiers. So this is being done by the financial sector. It gravitates towards the more advanced, bigger companies,” Kaiser explained.

“The smaller juniors — the amount of money that they’re raising in the $5 million or less (range) — it’s kind of flatlined, and this is not really a healthy thing,” he continued, adding that inflation is compounding these issues.

“When you apply inflation to everything, it’s a serious problem, because of the compliance costs, permitting cycle costs — everything costs an awful lot more than it used to, a lot more than inflation-adjusted CPI. So the whole sector, especially the junior (companies), the smaller ones, they are being starved of capital.”

By Kaiser’s calculations, 50 percent of TSXV-listed companies have negative working capital, along with C$2.4 billion of debt that will never be repaid. And in his view, the problems in the industry are more than financial.

“What is really bad is there are no younger audiences coming in behind us,” he said.

“Gen Z, the Millennials, Generation X — they don’t care about this sector. They’re into stories where you don’t need to know anything, which is why Bitcoin is perfect,” Kaiser quipped.

He noted that a lot of the problem is the regulatory and permitting framework in Canada, which draws out timelines and makes the space unattractive to new investors. Kaiser also explained the troubles around short selling, which limits a company’s ability to see its stock price fully realized on discovery.

It’s not just the Great White North

The US is also facing challenges in the resource sector, albeit different ones.

“When I saw the election outcome, I said, you know, this problem is one area where America is no longer great. It’s going to become a crisis a lot sooner than it would have, say, if Kamala Harris had won the election,” Kaiser said.

“It was going to happen anyways, just not as fast,” the expert added.

Since Trump’s first term, the US Geological Survey has become concerned about the country’s dependence on importing raw materials. While it’s become the world’s largest producer of oil and natural gas, the…