30%-50% of junior miners not expected to survive – BCSC report – by Dorothy Kosich (Mineweb.com – October 21, 2013)

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“Retail and institutional markets have virtually disappeared for the financing of junior mining companies,” a senior mining executive recently told a B.C. Securities Commission survey.

RENO (MINEWEB) – A report recently released by the British Columbia Securities Commission found some senior mining executives feel the market is at its lowest and should slowly start to recover in one to two years. However, other executives felt the market has yet to hit its lowest point and don’t expect conditions to significantly improve for another three to five years.

Of the in-depth interviews conducted with 15 mining executives, the participants agreed that there “will be an eventual exodus of mining companies and exploration endeavors,” said the report, BC Junior Mining at the Crossroads: Executive Management’s Perspective, which was authored by KPMG and commissioned by the B.C. Securities Commission.

“Between 30% and 50% of junior are not expected to survive,” said one participant in the interviews. “30% is fine, and perhaps required, but 50% is not.”

Large mining companies are expected to continue to shed uneconomic assets such as exploration programs, mine development programs and high cost operating mines, said the report. “While investors may continue to see mining companies ‘in the red’, all participants agreed this is healthy and part of the natural cycle of the mining industry.”

“As a result, exploration activities (and expenditures) are likely to continue to remain lower compared to deposit appraisal and mine operations,” said KMPG. “During this time, some participants expect significant changes to board members and management teams for large and small mining companies.”

“With the change, it is expected that new boards and management teams will require a period to: build investor confidence; make the changes necessary to help companies start with a clean slate.”

LONG-TERM OUTLOOK

Many of those interviewed for the report saw the potential exodus of less-economic mining companies as positive “because investor confidence may increase when stronger and better-established juniors remain in the market to compete for already limited available capital,” said KMPG. In the long term, the remaining companies are expected to regain momentum and rebuild investor confidence.”

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