The Vancouver Sun, a broadsheet daily paper first published in 1912, has the largest circulation in the province of British Columbia.
Exporation strong but slowing Chinese demand, eurozone crisis hamper financings
Junior mining companies are going through the toughest bear market since the 2008 financial meltdown, according to the Association for Mineral Exploration British Columbia.
In a quarterly letter to members posted on the association’s website, AME B.C. president Gavin Dirom said tough economic conditions have hit the sector again, prompted by worries about Europe’s sovereign debt crisis and China’s slowing demand for copper.
“Although the global mineral exploration and development sector may still be in a multi-year commodity super-cycle, very challenging equity financing and bear market conditions were the reality during the second quarter of 2012,” Dirom said in the open letter to members. “Members of AME B.C., especially prospectors and junior explorers, are experiencing the impact of these tough economic conditions.”
Dirom noted that equity capital raised on Toronto’s venture capital exchange, the TSX-Venture, was down 62 per cent in the period January to May over the same period of 2011. “Gold companies, for example, were only able to raise $445 million through equity placements in May and June, which is the lowest two-month total since late 2008.”
In an interview, Dirom said spending in new exploration in B.C. has dropped 20 per cent, year to date, from last year’s record of $463 million.
“It’s typically the juniors and the prospectors and so forth who are making the discoveries so they are key to the success and sustainability of the industry over the long term. But at this point, it’s tough for them to raise money.”
However, while a 20-per-cent drop is significant, spending remains above the average, he said.
“Anything north of $300 million a year is a good year for exploration in B.C.”
With stock market interest in juniors ebbing, exploration companies are turning to other tactics, Dirom said. They are reducing the scope of their work, laying off workers, partnering with larger, more established mining companies or selling. He said that despite the dip that began in late 2011, he remains bullish on the long-term commodities market. Signs that China will engage in more stimulus spending, stronger demand for gold from India and steady gains in U.S. growth are creating confidence that commodity prices will rise in the last half of 2012.
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