Struggling junior miners woo investors to fund exploration projects
02/05/2019 22:21
By Nichola Saminather
NEW YORK, May 2 (Reuters) - Junior miners, struggling to
fund exploration as institutions seek lower risk and better
returns from larger rivals and newer industries, sought to sell
potential investors on projects on Thursday, with mixed success.
The proliferation of index funds, sluggish gold price growth
and a shift into cannabis and cryptocurrencies by risk investors
has left junior miners short of funding.
While the mining industry has seen a tentative revival in
interest, much of that capital has flowed to larger producers.
"There has never been greater divergence between big and
small companies in the mining sector. Big companies are healthy.
... They have a lot of (earnings)," Peter Grosskopf, chief
executive of asset manager Sprott Inc, said at the Mines and
Money Conference. "The juniors are nowhere near that."
Ian Berzins, CEO of Braveheart Resources Inc BHT.V , said
the company is close to completing development on its British
Columbia gold project, thanks to flow-through funding, but needs
capital for future exploration.
Flow-through funding allows companies to pass on to
investors tax deductions related to exploration or development.
"We've relied on families or insiders," Berzins said in an
interview on the sidelines of the conference. "Our other options
are, we could sell a royalty on some or all of the property, or
enter into a streaming agreement ... but once you've given up a
royalty, it's gone forever."
Bought deal financing for junior explorers, in which
investment banks commit to buy entire offerings from issuers,
slumped 40% in 2018 from 2017, the Prospectors and Developers
Association of Canada and deals researcher Oreninc said in a
March report.
The MVIS Global Junior Gold Miners index .MVGDXJTR has
lost 14% in the past year, compared with the S&P/TSX Global Gold
index's .SPTTGD 5% drop.
Anglo-Australian Resources AAR.AX Chairman John Jones, who
presented the company's Feysville Gold project near Kalgoorlie
in Australia, said growing battery minerals demand has lifted
explorers with such projects at the expense of others.
"It's inevitable that (struggling companies will) have to
give up ... quite a bit of equity in projects to reduce their
exposure by getting a cashed-up partner," Jones said. "Some of
them are private, high-wealth individuals, or private equity."
(Reporting by Nichola Saminather; Editing by Richard Chang)
((Nichola.Saminather@thomsonreuters.com; +1-416-687-7604;))