The plight of the junior miner has become an all-too-familiar scenario for the explorers, analysts and investors involved in the mining sector. Investment is down. Projects are on hold. Some junior firms have been forced to close, unable to weather the downturn.
In a detailed report by PricewaterhouseCoopers (PwC) released November 4 – "Survival Mode Continued: Junior Mine 2013" – the performance of the top 100 junior miners on the TSX Venture Exchange (TSX-V) is tracked.
And the result: more bad news.
According to the report, the market capitalization of the top 100 junior firms – of which 64 are based in British Columbia – fell 44% to $6.5 billion, as of June 30, 2013. In 2012, the top 100 juniors fell 43% over the same period. The basis for the 100 firms tracked in the report was market cap.
The drop in market cap for junior miners mirrored the performance of the TSX-V on the whole – the aggregate market cap on the exchange fell to $11.1 billion as of June 30, 2013, down from $20.8 billion last year. The mining sector represents about 35% of exchange's market cap.
Cash is also scarce. Among the companies tracked, cash and short-term investments fell to $1.2 billion this year, down from $1.9 billion in 2012. The top 100 raised $795 million through equity financings in 2013, down 50% from the $1.6 billion raised in 2012.
A lack of cash has, subsequently, affected capital expenditures for junior miners. In 2013, capital expenditures dropped 15%. The hardest hit were explorers, who cut their capex by 28%, approximately $133 million. Junior producers cut their capex spending by 25%, or $117 million.
The only junior companies to increase their capex thus far in 2013 were developers, who spent $74 million more than they did in 2012.
Write-downs in 2013 paint an even starker picture. Among the top 100 juniors, write-downs increased by 175%, or $87 million.
On the whole, revenue fell 25%, or $293 million.
In a phone interview with Business in Vancouver, Mark Platt, PwC's mining leader in B.C., said that while the data is bad for the companies tracked in the report, there are many more junior firms navigating even worse financial scenarios.
"B.C. is the global centre for junior mining companies," said Platt.
"The issues faced by the companies lower than the top 100 are even more dire."
The TSX-V has implemented some measures to help struggling juniors. For instance, the exchange has reduced the minimum price for warrants, options, convertible securities and initial public offerings (IPOs), reads the report.
The number of IPOs on the exchange, however, has fallen consistently in recent years. In 2013, there were 24 IPOs. In 2012, there were 45.
In 2011, there were 52.
With fewer junior companies entering the market – and with less money being spent on exploration by those already listed – Platt isn't confident the junior mining sphere will rebound in the next year. But without that rebound, it's hard to spur investment. The mining world needs the specialized companies willing to explore and drill, he said.
"This is the feed stock for the mining industry – for the mid-size and large companies. If you explore less, you find less. Discoveries build momentum," said Platt.
"The money larger companies are going to exploration won't be sufficient. The chance of finding something is much greater with exploration companies. That's why we have hundreds and hundreds of juniors."
PricewaterhouseCoopers releases its TSX Venture Exchange junior mining report annually.
