Canada’s junior miners must embrace unique strategies to survive continued economic challenges

Liam Fitzgerald, PwC's Canadian Mining Leader. — Photo courtesy newswire.ca

TORONTO, Oct. 6, 2015 /CNW/ - The drying up of equity and debt markets coupled with new lows in cash reserves have pushed Canada's junior mining industry on a further downward financial trend, according to PwC's annual report on the TSX Venture's top 100 junior mining companies. But the industry is looking to innovate and collaborate in an effort to move forward.

According to the 9th annual Junior mine report, Time for Change, the top 100 juniors raised $514 million in equity financing in 2015, down 25% from last year, while debt financing fell 27% to $278 million over the same period. Despite attempts to reduce spending, cash reserves are dwindling to new lows as the top 100's on-hand cash dropped on average from $10 million to $7 million.

These numbers are paired with news that overall revenue is down 28% from 2014, a drop of nearly $195 million, balanced slightly by an 18% reduction in overall net losses. Market capitalization dropped significantly from $7.9 billion to $4.8 billion as of June, 2015.

"The challenges in the junior mining sector persist and the industry is really at a crossroads," said Liam Fitzgerald, PwC's Canadian Mining Leader. "Despite the downward trend we have seen some stories of true innovation this year – those junior miners who have moved from simply keeping the lights on to transforming their business have given us a glimpse into what could be a more optimistic future."

While highlighting the state of the industry and its challenges, Time for Change also shines a light on the creative, less conventional steps taken by junior miners who have found success over the last year. The report breaks these steps down into five categories:

• Market aggregation – By combining forces, miners can lower administrative costs, share risk, and pool assets by region which can help put them in a better position for market resurgence.
• De-risking – Financing a project by partnering with a major miner can help with obtaining much-needed financing.
• Non-traditional financing – Diversifying capital through loans and pursuing a syndicate of backers can help miners put together the finances needed to move forward on acquisitions or other investments.
• Distressed firms –Deferring discretionary spending and keeping open channels with lenders during troubled times can help renegotiate financing terms during distress.
• Embedding a culture of innovation – New innovations such as data analytics, drones, and 3-D printing can completely transform mining, while fostering collaboration can help miners overcome challenges.

The full Junior mine 2015: Time for change report, which includes the latest industry figures and insights from Junior Mining sector leaders can be found here: http://www.pwc.com/ca/en/industries/mining/publications/junior-mine-review-of-trends-in-tsx-v-mining-industry.html

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SOURCE: PwC (PricewaterhouseCoopers)