Mining exploration companies shift focus to survival as venture capital dries up in bear market – by Gordon Hamilton (Vancouver Sun – May 14, 2013)

http://www.vancouversun.com/index.html

Mining companies are hunkering down to weather what some say is the worst bear market in memory by shutting down operations, cutting staff and making fewer deals.

The downturn is hitting British Columbia’s mineral exploration companies particularly hard, according to Gavin Dirom, president of the Association for Mineral Exploration B.C.

Venture capital for the sector has “absolutely dried up,” Dirom said Tuesday. As a result, juniors are cutting back on exploration activity, focusing on fewer properties and consolidating their properties through joint ventures to survive.

“It’s the worst we have ever seen,” he said. “Economic survival mode is what these companies are facing.” He was commenting on a report by consultants Ernst & Young that found only 24 per cent of global mining companies are going to be focusing on mergers and acquisitions — the industry’s lifeblood — over the next six months.

The Ernst & Young report Capital Confidence Barometer, says that although confidence in the sector is improving — 57 per cent of companies believe the world economy is strengthening — the appetite for mergers and takeovers has vanished. Weaker commodity prices, cost inflation and labour unrest have taken their toll, said Bruce Sprague, Ernst & Young’s Canadian mining and metals leader.

However, the depressed value of mining stocks and the fact companies are divesting assets is creating opportunities for what Sprague described as non-traditional investors.

“More and more private equity and sovereign wealth funds are entering the market, securing supply and seeking financial return on undervalued assets,” Sprague said.

It’s a trend Dirom has seen unfolding in British Columbia.

“These companies are undervalued and their stock prices are reflecting that. So it’s a buyer’s opportunity and who is starting to buy? What I have seen of late is private equity placements.”

For the rest of this article, click here: http://www.vancouversun.com/business/Mining+exploration+companies+shift+focus+survival+venture+capital+dries+bear+market/8384874/story.html