Reservoir Minerals which is developing several copper-gold projects in SEE region is caught in the midst of a market downturn. Reservoir ‘s JV projects with Freeport McMoran and Rio Tinto in Serbia may be the only developer advantage during the commodities market disturbance.
The junior mining sector remains caught in the midst of an unparalleled downturn. Equity and debt markets have dried up and cash reserves are reaching new lows. Waiting is no longer a viable strategy: junior miners need to take urgent action now, before crisis hits, and do whatever it takes to ﬁnd the cash to keep their businesses and projects moving forward.
PWC Canada report Junior mine 2015, looks at the challenges facing junior miners and the unconventional solutions that deserve serious consideration. We explore aggregation, de-risking, non-traditional ﬁnancing and dealing with periods of ﬁnancial distress—and share insights from junior mining leaders whose determination and willingness to embrace new thinking is creating future value.
PWC analysis of the top 100 junior mining companies listed on Canada’s TSX Venture Exchange (TSX-V) paints a grim picture— but not an unexpected one. Key ﬁnancial indicators show a steady, ongoing decline across the sector.
The market capitalization of the TSX-V’s top 100 miners has dropped signiﬁcantly, from CAD$7.9 billion last year to CAD$4.8 billion at June 30, 2015. Mining’s share of the total TSX-V has also continued to fall: once making up more than half of the exchange’s total market cap, mining now contributes only 36%.
The pain is shared across the sector, as the average market capitalization of explorers, producers and developers alike has fallen sharply over the past year. While the total market capitalization has declined slightly (11%), explorers’ total market cap has dropped by 45%—and producers’ total market cap has plummeted 57%.
The top 5 juniors in 2015 illustrate just how much the sector has shrunk over the course of the downturn. This year’s top 5 are signiﬁcantly smaller than their 2014 predecessors: four of them wouldn’t have made last year’s list.
Reviewing the ﬁnancial highlights for the top 100 companies echoes what we’ve heard in our conversations with mining leaders across the country. Cash is tight, revenue and income are falling alongside lower commodity prices, and ﬁnancing is incredibly hard to come by.
Cash reserves are dwindling
Despite prudent steps to reduce spend, cash is running out: the top 100’s cash position fell nearly one-third (31%) since last year and total cash reserves are at an all-time low. On average, the top 100 junior mining companies have CAD$7 million on hand, down from CAD$10 million last year.
Revenue and income
Across the top 100, overall revenue is down 28% from last year, a drop of nearly CAD $195 million. That’s balanced, slightly, by an 18% reduction in overall net losses.
It’s becoming increasingly hard to ﬁnd new sources of funding. Across the top 100, cash provided by ﬁnancing has dropped 27% since last year, and shareholders’ equity has fallen 30%.
The top 100 raised CAD$515 million in new equity ﬁnancing in 2015, down 25% from the previous year.
While 74 companies raised equity last year, 15 companies raised 86% of it. The vast majority raised less than $1 million each, most of which came through private placement.
It’s the same story for debt ﬁnancing. Overall, 24 companies among the top 100 raised CAD$278 million in new debt ﬁnancing in 2015, down approximately 27% from 2014, with more than two-thirds (69%) of that amount being raised by four miners reads the Canadian PWC junior mining report.