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Canadian juniors more resilient than many expected: PwC report

by Cecilia Jamasmie | November 4, 2013 | Reprinted by permission of MINING.com

A report from PricewaterhouseCoopers LLC released November 4 shows that despite having been hit hard by market conditions, only 31 juniors listed on the TSX Venture were delisted in the 12 months ending June 30.

In its seventh annual report, PwC acknowledges the sector has endured another rough year, with the market value of the top 100 dropping 44% to $6.49 billion. However, it notes most of the juniors that delisted did so due to mergers and only seven because they requested delisting or failed to pay listing fees.

The finding contradicts recent reports suggesting catastrophic scenarios, such as one that suggested at least 50% of the small mining endeavours won’t be around by 2015.

PwC’s report suggests instead that junior miners have been very resilient amid rough market conditions. They have managed to conserve their cash and keep the lights on, despite seeing their cash and short-term investments drop by $695 million to $1.2 billion.

Confidence crisis

While delistings were fewer than predicted, PwC’s study does reveal most players fear for the future.

It doesn’t help to know that the juniors’ combined value has fallen so far that miners are no longer the dominant force on the Venture exchange. Mining companies represented only 35% of the Venture’s total market value this year, says PwC, down from 51% last year.

Companies large and small have cut expenditures, which for some juniors translated into freezing exploration work, while for others it meant merging or accepting takeover bids to survive.

Writedowns climbed to $87 million for the year ending in June, up from $32 million the year before.

The top 100 raised $795 million in equity financing, down 50% from $1.59 billion in 2012.

The number of initial public offerings has fallen by more than half in the past three years to 24 in 2013, down from 52 in 2011.

John Gravelle, PwC’s global and Canadian mining leader, says the key for juniors is patience. “When the recovery does come, investors will most likely put their money into the senior producers first, given their stronger balance sheets and proven production and profit-making capabilities.”

That is why he recommends small players ensure they have the flexibility to advance projects until the market turns. “Many seniors aren’t looking at buying new projects now, but concentrating instead on cleaning up their own balance sheets before they start buying again,” concludes Gravelle.

Reprinted by permission of MINING.com

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