With speakers, analysts, exhibitors and investors all converging in the same space, the World Resource Investment Conference (WRIC) is a great opportunity to gauge the pulse of the Canadian junior mining and exploration sectors.  Of course, with a year that has unfolded the way it has for the junior mining and exploration space, many attendees and speakers were content that there was a still pulse to be found at all.

Since January (the time of the last resource conference) the TSX Venture, where many Canadian exploration and mining stocks are listed, has declined about 24% and is drifting towards lows not seen since 2008.

Going into this year’s conference, it was a safe bet that was going to be a lot of doom and gloom to go around.  The sentiment from several speakers and from attendees was that there weren’t as many investors through the door as has been previously observed.  One blog post stated the following of the conference:

“The place was dead. I have never in my life seen this trade show so dead.”

Sobering statistics put forward by sector analyst John Kaiser also fanned the flames of negativity.  According to Kaiser’s research the list of companies on the TSX Venture with less than $200,000 in the bank has climbed to over 700, a sign that many of these companies will simply not have the capital on hand to continue operating.  Brent Cook, author of the Exploration Insights newsletter, echoed the same sentiment in his interview.

The consensus, it appears, is that things in the junior mining sector seem likely to get worse before they get better.

With the negative sentiment in the junior markets at a palpable high, several exhibitors and speakers pointed out that the negativity is not only healthy but potentially a compelling reason to look for entries into the junior market.

For example, the first minute or so of the interview with Mickey Fulp of TheMercenaryGeologist.com highlights the kinds of investors that he observed coming to these types of conferences as being ‘contrarian’ investors.  Many of the retail investors, it seems, have either been shaken out of the market or have lost interest.

Economic tides turning against companies are nothing new.  Every sector and business has them and so the turn has come for many of the junior mining and exploration companies to face the reality that the capital is not prepared to jump into the kind of risk that junior miners and exploration stocks represent.  That said, what might be ‘different this time’ is something that the final panel on day 1 of the conference tackled: regulatory changes to the way capital gets raised in junior companies.

The final session on day 1 was a panel discussion on the current “crisis” in the venture capital markets for mining and exploration companies.  In a session moderated by Joe Martin (Cambridge House founder and chairman), panelists Richard Carleton, Eric Coffin, John Kaiser and Don Mosher tackled the particularly thorny issue of proposed regulatory changes to how capital gets raised for junior mining and exploration companies.

Lots of ground was covered during this session, but it was clear that the proposed regulatory changes to how companies can raise money in BC is making more than few industry members cry foul.  The fear, as the Venture Company Association (VCA) puts it, is “strangulation by regulation”.  With tighter rules on who can raise money for junior companies, there is a genuine concern that smaller companies will simply not be able to attract the kinds of investment they currently can under the proposed changes.

From what the panel discussed, it seems that the battle lines are being drawn and the issue of capital raising is going to be thrust on to the provincial political agenda.  There is certainly more to come from this group and this story. To learn more about the VCA, check out their website here as well as a great piece in the Financial Post here.

With uncertainties around the economy, investor appetite for mining/exploration stocks (vs dividend paying stocks for example) and regulatory changes to capital raising, it is understandable why investors are likely going to step aside. It is worth reiterating, however, that stock markets are forward looking. So while the news today is bad, the ‘bottom’ that many investors are constantly on the lookout for will only truly be known once it has passed.

What the cadre of speakers and analysts from this past WRIC has shown is that professional speculators are willing to play in any market, even when the rules of the game change.  It seems that those who have lived through these kinds of cycles before understand that opportunities are born out of crisis.  The question many of them seem to ask of themselves, however, is whether or not they are prepared to take advantage of these opportunities.