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EDI TO R ' S COM ME N T S E l l s w o r t h Dick s o n Junior miners – the bad news and the good news There is no getting around the fact that the TSX Venture Exchange has been in a bear market for about two years now. Many investors have suffered the agony of seeing their shares in good companies with good management and good projects slump to new lows. Some have more cash on hand than their market capitalization – never mind their ounces or pounds of metal in the ground. At the same time, we are witnessing shares in industrial sectors, other than mining, hit new highs on the Dow and TSX. Market sentiment toward mining is risk adverse while investors exhibit bravery in bidding up stocks in other sectors. The combination of low share prices and the reluctance of private placees to get on board means many junior miners are having trouble raising sufficient exploration funds to advance their projects. In a recent PricewaterhouseCoopers report, it noted that its 2012 Top 100 TSXV mining companies saw a 52% decrease in equity and debt financings compared to 2011. Indeed, PwC's 2012 Top 100 watched their market capitalization decline 43% compared to 2011. This reflects a "volatile market populated by skittish investors who want greater returns." So what does this mean for junior miners? We may see juniors being acquired by mid-tiers and seniors at bargain prices, while others may become de-listed. Is there any good news out there? Actually, there is. The PwC report also notes that during the last two years the "major investment story for juniors was steel companies investing in the Labrador Trough." As well, PwC is expecting "Asian companies to invest in Canadian gold companies." Considering the hundreds of junior gold seeking companies on the TSXV, this could be the light at the end of the tunnel. In addition, the report stated, "other juniors with multiple projects with excellent potential may look to divest one project to raise cash to allow them to move their other projects forward." John McCoach, President of the TSX Venture Exchange, said, "Junior mining companies have proven to be resilient." He remains optimistic due to the demand for precious and base metals and is of the view that mining is still an attractive business – especially within Canada. Companies listed on the TSX and the TSX Venture Exchange account for 58% of the world's publiclylisted mining companies. It's hard to believe, but exploration financing may have turned a corner. In a new report by IntierraRMG, it noted that "financings for exploration reached US $1.49 billion in Q4 2012, compared with only US $0.65 billion in Q3 2012." There is more good news. At a recent luncheon, Mike Jones, President and CEO of Platinum Group Metals Ltd., which has an advanced platinum project in South Africa, mentioned that if you are a producer wishing to expand or are a company preparing to build a mine, there are substantial funds available. In other words, there is money at the mid-tier and senior levels. Shareholders in producing mining companies or those with advanced projects have often realized good capital gains from their investments. In addition, – not always – but sometimes, very good drill results have lifted shares of some fortunate juniors. Next month we are going to review a number of these mining stocks that have seen significant price gains. n Ellsworth Dickson, Editor-in-Chief Email: editor@resourceworld.com T: 604 484 3800 | 1 877 484 3800 APRIL 2013 www.resourceworld.com 7