The top junior mines on the TSX Venture Exchange are facing decreases in debt and equity financing, as well as market capitalization.
Miners must either reduce spending substantially or turn to alternative forms of financing for growth, says PwC’s latest mining report.
The market capitalization of 2012’s top 100 companies decreased 43% compared to 2011. The number of mining companies with market capitalization of more than $200 million also dropped, falling from 36 in 2011 to 13 in 2012.
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“Investors have cautious of the volatile market and unwilling to invest, with the macro-economic pull-back driving investors to hold on to or cashing in their investments says John Gravelle, mining leader for the Americas, PwC. “While a dramatic turnaround is not expected anytime soon, recent market activities should give junior miners a resurgence of optimism for 2013.”
With the IPO market falling silent for most of 2012—only four mining IPOs on the TSX-V were completed in Q3 2012—Ivanplats’ $300 million IPO could signal the new beginning for mining executives looking to initiate offerings.
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Additionally, companies are seeking alternative forms of financing due to the drop in the number of investors.
“Anticipate foreign investment and vertical integration to continue to be an important part of junior miners’ growth strategy in 2013,” says Gravelle. “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.”
He adds, “Investors are noticing juniors who are in advanced stages of development or production. Overall in 2012, producers were the only group who did not face a significant decline in market capitalization.”