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For many junior miners, the question is no longer about whether they can raise money at the PDAC conference this year. The question is how they will even get there.
Using a search engine tool on mining analyst John Kaiser’s website, it appears that a mind-boggling 94 companies with negative working capital are listed exhibitors at the conference.
“I think a lot of them aren’t going to show up,” Mr. Kaiser said. “I don’t know how they can afford to fly to Toronto and pay for the hotels.”
That sums up just how awful the market conditions are for junior mining companies today. Despite relatively healthy commodity prices, they are suffering through a surreal bear market in which risk capital has flowed out of the sector and is simply not available to most of them anymore. They routinely have market values below the cash on their balance sheet, and the idea of spending cash is scary when it is so tough to find any more. Their share prices have been slashed, and are routinely down 90% or more in the past 12 or 18 months.
“You have a horrendous washout in the market where institutional money has departed, and retail money has no interest in it,” said Mr. Kaiser. He figures there are nearly 700 companies on the TSX Venture Exchange with less than $200,000 in their treasuries. All the Venture mining companies combined have raised only $110-million this year, according to Financial Post data.
Even the ones with promising discoveries are struggling to draw investors. Take Probe Mines Ltd., which made an exciting greenfield gold discovery in Ontario, as safe a jurisdiction as there is. Probe is covered by 10 sell-side analysts, has a great deal of institutional support, and plenty of cash in its treasury. Its reward is a meagre $117-million market cap.
“Right now, the market is looking at these [juniors] as liquidity events and nothing more,” chief executive David Palmer said.
“It’s become a very critical kind of market, where 99 pieces of good news are of less value than the one piece of moderately bad news.”
At least Probe is in a healthy financial position and can ride out the tough times. The weaker companies are struggling to survive.
They have a couple of options. One is to bite the bullet and do a horrendously dilutive financing to raise enough money to drill a couple of holes and hope to get lucky. The other is to retreat into their shells and do absolutely nothing. Neither is very appealing.
For the rest of this article, please go to the National Post website: http://business.financialpost.com/2013/03/03/in-canadas-crowded-market-junior-miners-get-the-shaft/