COMMENT: Other avenues to junior survival

Yesterday, CMJ readers learned how successful Secova Metals has been at raising exploration funds, even though its flagship Duvay gold project in the Abitibi Greenstone Belt lacks 43-101-compliant resources. The company does it the old fashioned way – experienced people looking for gold where gold has been frequently found.

Today, PricewaterhouseCoopers has released its 2015 report on the junior mining sector, Time for Change, urging juniors to embrace unconventional strategies to survive today’s economic challenges. According to PwC figures, the top 100 juniors raised $514 million in equity financing so far in 2015. That number is 25% down from last year. Debt financing fell 27% over the same period. PwC says the junior’s cash reserves are dwindling, averaging only $7 million per company.

Time for Change offers these less conventional means of survival tapped by juniors over the last year:

• Market aggregation – By combining forces, miners can lower administrative costs, share risk, and pool assets by region which can help put them in a better position for market resurgence.
• De-risking – Financing a project by partnering with a major miner can help with obtaining much-needed financing.
• Non-traditional financing – Diversifying capital through loans and pursuing a syndicate of backers can help miners put together the finances needed to move forward on acquisitions or other investments.
• Distressed firms – Deferring discretionary spending and keeping open channels with lenders during troubled times can help renegotiate financing terms during distress.
• Embedding a culture of innovation – New innovations such as data analytics, drones, and 3-D printing can completely transform mining, while fostering collaboration can help miners overcome challenges.

Whether these strategies will be enough for the survival of all – or even most – of today’s junior companies remains to be seen.

The full Junior Mine 2015: Time for Change report, which includes the latest industry figures and insights from junior mining sector leaders can be found at PwC.com/ca/en/industries/mining/publications/junior-mine-review-of-trends-in-tsx-v-mining-industry.html.