Canada’s junior market continued its downward trend last week, but local exploration companies aren’t looking for handouts just yet.
On Friday, three Vancouver junior mining companies adopted poison pill strategies to fend off hostile takeover bids.
Normally, the strategies, also known as shareholder rights plans, are adopted during a bull market when junior companies with hot-ticket assets become takeover targets to feed the production profile of larger companies.
But in the last three months, the TSX Venture Exchange, which is home to the vast majority of Canada’s junior mining companies (and hundreds from Vancouver), has slipped 23% to 1,897 from a March 7 high of 2,464.
Despite the three-month slip, Amarillo Gold (TSX-V:AGC), Adroit Resources (TSX-V:ADT) and SilverCrest Mines (TSX-V:SVL) adopted or reaffirmed poison pill strategies last week.
None of the companies has been the target of a takeover bid in recent months, but a common feeling among Vancouver’s junior resource community these days is that of being undervalued.
“There’s a lot of companies out there, especially the larger ones, that feel like they have the currency, in terms of higher share prices, to go out and make acquisitions,” Nolan Watson, president and CEO of Sandstorm Gold (TSX-V:SSL), recently told Business in Vancouver.
“But those valuations haven’t necessarily filtered down to the lower companies, so there’s a lot of smaller companies that feel undervalued and don’t want to sell.”
Last month, BIV reported a spate of poison-pill strategies being adopted throughout the junior mining sector (see “Mining companies popping pills” – issue 1126; May 24-30.)
At the time, Roger Taplin, a partner with McCarthy Tetrault’s business law group in Vancouver, said poison-pill strategies have no real downside and are relatively cheap to adopt.
At press time, Adroit’s shares were valued at $0.08, Amarillo’s at $1.36 and SilverCrest’s at $1.24.
Joel McKay