Juniors struggle in sea of red tape, fees and demographic losses – Benjamin Cox – by Simon Rees (MiningWeekly.com – February 27, 2015)

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TORONTO (miningweekly.com) – As the industry prepares for the 2015 Prospectors and Developers Association of Canada’s conference, many have written off the past year as another annus horribilis – a horrible year filled with more impairments, fire sales, debt headaches and muted prices.

The junior sector has struggled most, with many falling by the wayside or clinging on by their fingernails. But some have bucked the trend and have advanced their projects with inventiveness and flexibility.

The situation is unlikely to change any time soon, Oreninc MD Benjamin Cox told an audience at the Canadian Institute of Mining’s Management and Economic Society, in Toronto, on Wednesday. “So are you thinking about how you’ll survive over the next two years?” he asked. “Because I can tell you it’s not going to get better for a little while yet.”

Critical for the juniors had been the ongoing dearth of finance and liquidity. The major cause of this was the preference among investors for oil and gas over mining when choosing the extractive industries.

Of the money that was moving towards mining, most was being fed into the seniors’ corporate restructuring, leaving the juniors waiting at the back of the line. “The money we have left is going to the big boys,” Cox stated, adding that they were the first ones to obtain finance on a recovery.

Compounding matters still further, the expectations placed on juniors had fundamentally changed over the past decade or so. Before 2000, juniors conducted exploration and determined the viability of a project through drill work. Proceeds would be returned to the company if the project was sold and the junior would move on to its next objective.

Nonviable projects would either be terminated or placed on hold until their economics became more favourable. The resource supercycle’s peak years from 2004 to 2011 changed the dynamic by making many unviable projects suddenly economic. “These were the years in which everything was doable; it was a period when things were really bubbly,” Cox commented.

Concurrent with this, the seniors had downloaded tasks they traditionally performed onto junior shoulders, particularly in relation to environmental permitting and the social licence to operate. Most juniors were able to carry this extra weight in the boom years, but it had become an impossible burden for many in the downturn.

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