Contents

Introduction

Junior miners, a potent bellwether of mining industry trends, have had a tough five years. As base and precious metal prices fell from all-time highs in 2011, so their fortunes plummeted as well. The aggregate market capitalization of junior miners quoted on the Canadian TSX Venture Exchange (TSX-V) crashed by 81% from a record Cdn$42 billion (US$33 billion) in 2010 to a paltry Cdn$7.76 billion in 2015. Feverish financing activity by junior miners raised a best-ever Cdn$5.9 billion on the TSX-V in 2011 but petered out as investors dramatically lost their appetite for "boom and bust" high-risk junior mining stocks in the face of falling commodity prices. In 2015, when the market bottomed out, juniors were only able to raise a meager Cdn$1.09 billion on the TSX-V, an 81% dive from the 2011 high.     

Junior exploration companies reined back spending to weather the storm; projects were put on hold and exploration activity dwindled. From 2012 onwards, annual global exploration budgets - including major, intermediate, junior and state companies - were slashed for four consecutive years, falling from an all-time high of over US$20.5 billion in 2012 to US$6.89 billion in 2016, according to S&P Global Market Intelligence (S&P). Junior companies already embarked on developing projects sought alternative forms of financing. Many junior companies delisted, merged or were acquired by financially stronger intermediate or major players taking advantage of the downturn to pick up new assets at lower prices. Others lay dormant waiting to spring when an opportunity arose. The number of mining companies trading on the TSX-V dropped by around 300 to approximately 1,000 listed companies today.

But over the last year and a half there have been signs of life. Improved commodity markets, first in gold since the first quarter of 2016 and then in base metals since the last quarter of 2016, have led to renewed activity on the TSX-V, which holds the world's largest listing of junior mining companies.

Drilling at Juanicipio silver project in Mexico. Credit: MAG Silver

"The first half of 2017 was very positive for the TSX-V," says Orlee Wertheim, the head of business development on the TSX and TSX-V. "There was an 86% increase to Cdn$1.9 billion in the amount of money raised on the TSX-V compared to the first half of 2016. We're seeing a bigger increase in financing on the venture exchange than on the TSX which is really interesting. It indicates that people are interested in exploration right now."

S&P data indicate that the funds are translating into increased exploration activity. "Our pipeline activity index, which measures exploration and development activity, increased in the second quarter of 2017 to its highest level since the third quarter of 2013," said Chris Hinde, the director of reports for S&P Global Market Intelligence's Metals and Mining segment, in an August webcast. There was a significant jump in the number of projects reporting drill results, and new drill programs reported worldwide rose to 70 in the second quarter from 57 in the first quarter of the year, according to Hinde. After a dark five years is the future finally looking rosier for junior miners?

Cover photo: Trench sampling at Cajueiro project in Brazil. Credit: Altamira Gold

Snapshot: A Decade of TSX-V Mining Finance

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