Juniors continue to struggle as confidence crisis lingers in the mining industry: PwC
According to Waiting out Uncertainty, an analysis of the top 100 junior mining companies on the TSX Venture, global economic volatility and suppressed prices of most metals and minerals have hit the junior mine sector particularly hard. Juniors' challenges are more prominent because risks are higher, budgets are smaller, and revenue to drive projects is often a long-term goal.
However, juniors are confident that the worst may be over, and the 20% increase in market capitalization from 2013 paints an optimistic picture. Costs have been cut as companies conserve cash.
Still, financing struggles persist, as overall juniors are having difficulty raising money to grow and sustain their operations. The top 100 raised a total of $685 million through equity financings in the 12 month period ended June 30, 2014, down from $795 million a year earlier. Many have had to turn to more risky debt financing, raising $379 million through such methods during the same period. Following a similar trend, the number of IPOs on the TSXV was down to just two for the same period (compared to 24 during the previous year), while the number of companies delisting from the TSXV nearly doubled. These figures point to a troubling pattern for juniors over the year ahead unless some confidence can return to the sector.
"Times are certainly tough in the mining industry, and recovery usually starts with the larger companies. We are optimistic that these businesses will rebound, after which the juniors will likely follow suit," said John Gravelle, Global Mining Leader, PwC.
"Junior mining executives are often industry veterans with the business-savvy needed to navigate through a turbulent period for the sector, and we’re heartened by how many companies are surviving. However, recovery will take time, and juniors will need to continue to have grit and determination throughout the difficult times ahead."