Is management on vacation? The decline in the market value for an ounce of in situ gold has significant implications
for junior explorers. The potential reward for new discoveries has effectively been cut in
half over the past 12 months. While a change in the trend in gold to strength from
weakness would likely improve sentiment toward the junior mining sector and in situ
values, we believe a fundamental shift in outlook for the sector likely needs to occur to
reverse the current down trend. Without a fundamental series of positive catalysts,
however, we believe the sector could be in for additional downward pressure on low
overall volumes. While exploration will continue to be an integral part of the mining
sector, junior mining companies need to be wary of this new environment and manage
their capital accordingly. This is an extremely challenging environment for financing.
Companies that burn through their balance sheet too quickly are likely to be faced with
increasingly onerous dilution and fees associated with new funding.