The British Columbia Securities Council (BCSC) announced this morning the release of a report called BC Junior Mining at a Crossroads: Executive Management’s Perspective.
The report, which was prepared by KPMG, was commissioned by the BCSC with the aim of getting a better understanding of why BC’s junior mining sector is currently seeing such a significant downturn. The 15 senior executives interviewed for the report — all from BC-based junior mining companies — revealed that for the most part, the usual factors are at play. Those include:
- slow economic growth
- global financial issues
- the need for major miners to rid themselves of “toxic assets” and problematic projects
- resistance to higher-risk investments from institutional and retail investors
The interviewees also said that regulatory costs and policy barriers are an issue; however, the overall consensus was that addressing those factors “would not solve the current fundamental problem of raising capital.”
The Vancouver Sun’s report on the BCSC release reveals that the fact that junior mining companies have entered “survival mode” is causing problems as well. Essentially, much of the funding being raised today is “survival capital — being used to keep the company operational until such times as the market returns.” That means juniors are not able to move forward with studies and exploration initiatives.
Moving forward, the survey participants see some hope; many reportedly think that today’s downturn is cyclical and thus “conditions should improve over the next few years.” However, they believe that before the sector can recover, major miners need to regain investors’ confidence by cleaning up their balance sheets; there also need to be fewer junior mining firms. Unfortunately, some believe that when those things happen, Vancouver will lose some of the geologists, lawyers, independent brokers and accountants associated with the mining sector.
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.