The plug should be pulled on these marginal junior miners, say investors
Of the 2,340 companies listed on the TSX Venture Exchange, about 1,400 are junior mining and exploration companies – many of which are headquartered in Vancouver.
But to hear retail brokers like Rick Rule describe them, more than 500 of them might as well be classed as pulp and paper companies, because that’s about all they produce: paper filings to meet exchange listing requirements, at the expense of exploration.
The chairman of Sprott Global Resource Investments Ltd. is among the growing number of resource-sector investors who say the TSX Venture Exchange has become weighed down by companies that should be considered clinically dead.
Bill Sheriff, CEO of the reinsurance company Till Capital, agrees: “A bunch of these should be delisted. We’re majority owners of a couple of companies that, quite frankly, one of them should be delisted. It’s only two cents.”
Tony Simon, a founder of the Venture Capital Markets Association, recently calculated that there are 598 companies on the TSX Venture Exchange with a collective negative working capital of $2 billion. That means they can’t possibly be meeting their listing requirements, according to Simon. But only about a dozen were delisted last year, according to the exchange.
The junior mining sector is now in its third year of a vicious bear-market mauling. The amount of capital raised in the mining sector in 2014 was half what it was in 2010 or 2011, said John McCoach, president of the TSX Venture Exchange.
“The good news is that Canada has actually taken in an increased portion of what is raised,” he said.
The bad news is that the mining sector is being hit by both low commodity prices and an exchange that is overpopulated by marginal players. As a result, even the juniors with good projects and good management teams are suffering from the lack of investor confidence. Sheriff likens them to nice homes in bad neighbourhoods.
McCoach said the exchange has considered a mass delisting. “We’ve absolutely had the conversations about whether a culling of the market would be healthy,” he said.
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