A tough market for debt and equity financing is pushing B.C.’s junior miners to reduce spending or look for new ways to finance growth, according to a PwC report released this morning.
The Junior Mine report found that the market capitalization of 2012’s top 100 companies on the TSX Venture Exchange (TSX-V) is down by 43% compared with last year’s list. Sixty-two of the companies on the list are based in B.C.
The report further found that equity financing decreased 41% to $1.6 billion compared with $2.7 billion raised by last year’s top 100 junior miners.
John Gravelle, PwC mining leader for the Americas, said investors have been cautious this year because of the volatile market.
“The macroeconomic pull-back is driving investors to hold on to or cash in their investments, leaving junior miners urgently looking for new sources of financing,” Gravelle said. “While a dramatic turnaround is not expected anytime soon, recent market activities should give junior miners a resurgence of optimism for 2013.”
The report noted that the initial public offering (IPO) market has “fallen silent” for most of this year, with only four IPOs completed on the TSX-V in the third quarter, compared with 14 in the third quarter of 2011.
The report also tracked that “alternative forms of financing” jumped to 14% in 2012 from 8% last year.
“Anticipate foreign investment and vertical integration to continue to be an important part of junior miners’ growth strategy in 2013,” Gravelle said.
“Foreign investors are being strategic in the way they structure investments – acquiring substantial economic interests without having to acquire the public company that owns the asset.”
Gravelle also noted that 80% of the TSX-V’s top juniors for 2012 are in production, whereas in 2011 80% were explorers.
“Investors are noticing juniors who are in advanced stages of development or production, as evident by recent deals completed in the junior mining space and by the market capitalization performance of juniors in performance,” he said. “Overall in 2012, producers were the only group who did not face a significant decline in market capitalization.”
