In mining, the great bifurcation is finally underway. After a multi-year bear market in which nearly every junior mining stock got decimated, the sector is enjoying an honest-to-goodness recovery in 2016. This year’s PDAC conference is ringing with renewed optimism as commodities, particularly gold, are rebounding.
But the early evidence suggests this recovery is limited to a very small group of companies. The high-quality juniors are raising money again and enjoying huge bumps in their share prices. Meanwhile, nothing has changed for most of the companies, which remains entrenched in an awful bear market with no end in sight.
During the commodity boom, the rising tide of metal prices really did seem to lift all boats. Hundreds of low-quality miners were able to raise billions of dollars of capital from willing investors. Venture-listed companies raised an astounding $4.2 billion from brokered deals in 2007 alone, according to Financial Post data. Ultimately, the vast majority of those funds were flushed away on bad projects with almost no trace they ever existed.
Investors have learned painful lessons from the losses suffered during that boom. As generalists slowly wade back into the sector this year, they are being incredibly careful with their capital. The only companies that can raise money are the best of the best, which are in the process of separating themselves from the pack.
In short, investors are demonstrating actual sanity, something that went sadly missing last decade.
“There’s really just a handful of us who had opportunities to finance in the last few months,” said George Salamis, chairman of Integra Gold Corp.
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