Shaky commodity prices, over-leveraged senior companies and a risk-averse investment climate has made for a well-documented difficult year in the mining industry.
And a new report, B.C. Junior Mining at a Crossroads, published by KPMG October 17, further illustrates those struggles by focusing on the plight of the junior miner.
The report, commissioned by the British Columbia Securities Commission and released at its annual conference, Capital Ideas, surveyed 15 Vancouver-based junior mining executives on issues ranging from financing activities and government support to outlook for the sector.
Respondents said that, prior to 2012, they were successful in raising required capital in the market. Since 2012, however, market conditions have not been favourable to attracting either retail or institutional investments.
To cut costs, some junior companies have decided to share administrative costs and office space, while others are spending money simply on sustaining day-to-day operations and maintaining a listing on an exchange. As a result, less money is being spent on exploration activities.
On the issue of government support, respondents were more positive, applauding the work of the B.C. government for attempting to strengthen the mining industry through plans such as the Mineral Exploration and Mining Strategy and the B.C. Jobs Plan.
Respondents did criticize the B.C. Ministry of Energy and Mines, however, for its inability to "manage its workload, resulting in delays from a backlog of permit applications."
In regards to the future of the sector, respondents agreed that less economically sound junior companies would close in the next two years, while others will remain dormant until the market recovers.
As for when that recovery will take place, respondents project there may not be a turnaround until 2014 or 2015. But the longer the recovery takes, the more damage will be done to Vancouver's reputation as an mining exploration "centre of excellence," some respondents said.
Data in the report was gleaned from interviews with 15 junior mining executives. According to the report, the "companies interviewed were largely in exploration phases; though a few were in the development and production stage." The respondents' identities were not disclosed.
