Is Money Available for Junior Miners?

Junior miners face a huge number of challenges, but financing is arguably at or near the top of the list for many of these early stage companies. 

One oft-cited set of statistics is that out of every 10,000 mineral prospects just 10 percent will be drilled, and an even smaller 0.01 percent will lead to a new mine.

Access to capital is a major part of moving projects forward, and a recent study from the Prospectors & Developers Association of Canada (PDAC) highlights the close relationship between the state of the resource space and access to capital.

“Commodity prices drive everything,” Glenn Mullan, president of PDAC, told the Investing News Network via phone. “That’s not just true on the down side … across the whole spectrum of commodities what this report really shows is that commodity prices drive first the level of financings and then as a consequence of the financings, more exploration.”

Case in point: funds raised globally for the mineral sector declined by 56 percent from 2012 to 2016 as the industry went through a lengthy downturn.

But as commodity prices began to rise in 2016 and 2017, companies had more luck raising money, with worldwide funds raised for the industry jumping 61 percent year-on-year in 2017.

PDAC works closely with explorers, and is interested in tracking these trends for that reason. “That’s exactly the inflection point that we’re looking for,” Mullan said. “It’s true for the biggest projects, it’s true for developed projects, it’s true for early stage projects and it’s still true for grassroots projects.” 

Mullan is encouraged to see financings beginning to increase again, but pointed out that “when you break it down you also see that a large part of that is debt financings, so not equity, not traditional private placements.”

As he explained, “the debt side … doesn’t really apply to the most junior of mining companies. They don’t use debt to finance grassroots exploration because they can’t.” That means the increase in financings seen from 2016 to 2017 is “a bit of a red herring because it raises the total amount, but it’s mostly concentrated for very large-scale projects.”

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