Ten things junior miners can do to survive the downturn – by David Poynton (Mining Markets Magazine – November 25, 2014)

http://www.miningmarkets.ca/

“The market turn for junior miners is just around the corner.”  Really? The problem is, that corner just kept moving ahead and three years into the downturn, we all still seem to be in very tough times. With gold now under US$1,200 an oz. and our seniors making drastic cost cuts, what is next? Where are those better days?

Our industry in general — and the junior mining sector specifically — has undergone a fundamental and permanent change. Regular routine financings where all you debated about was a penny here or there, or commission, are long gone. Reasonable M&A deals and fair pricing are difficult to find — if at all — those with money can demand very steep terms. I’m not sure the “good old days” will ever return.

So let’s face it head on. Companies need to accept the new reality in order to adapt and survive. It is time to face some harsh truths — cash is king and it is time to scrimp and save every dollar. Time for some tough decisions and reviews.

Three years into this downturn, investors might be surprised at how many companies have only done the window-dressing and, hoping that elusive turnaround will save them, not even attempted to cut to the bone.

Often, management and boards are unable or uncomfortable dealing with the tough questions — they are often as not human issues: who keeps a job and who doesn’t? It is about our friends and colleagues. Whose family will be out a paycheque? However, survival of the company is the ultimate goal, and must be for shareholders. Questions must be asked about how to cut costs to the bare minimum — we all must remember that the last dollar raised may in fact be the last for some time to come.

Ten points which I offer as food for thought:

1. Look beyond the obvious.

Typically, to cut costs, the battle cry is: “cut exploration, cut IR and cut director fees.” Far too many times, I have seen companies reach this conclusion while head office costs remain untouched. Rather, corporate head and site office costs should also be closely scrutinized — from personnel to professionals to frequency of press releases to third-party charges — everything. And if that’s already been done once, time to do it again. Anything that does not contribute to survival – to the drill in the ground — should be zero based, re-assessed and justified.

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