The Junior Mining Graveyard... We are fortunate to be fully carried to production with Hudbay, and have cash in the kitty.
Most are not so lucky. Good long term vision by the Vms company.
Author: Geoff Candy
Posted: Thursday , 05 Dec 2013
LONDON (Mineweb) -
Take advantage of the market you are in, is the advice Rick Rule gave those listening to his keynote address at this year’s Mines and Money conference in London.
He was speaking specifically about commodities investors who now find themselves in a bear market, but the advice can equally be applied to junior miners. The problem is, it seems, the market in which these miners find themselves, and the one they would like to be in are rather far apart. And, as such, they are positioning themselves for what investors used to want, rather than what they are now looking for.
During a panel on ‘The future of funding ‘ Graeme Hossie, CEO of London Mining put it another way, “When we started the company there were a lot of exploration projects that were attractive. Capital coming into the industry then had a lot of choice and a head start, fast forward 8 years and a lot of good projects have been drilled up, resources have been defined and they have been a left a bit stranded because there is a big gap between exploration and production.”
Underlining his point, Hossie added, that investors no longer have the patience for the big, multi-billion ounce projects.
He says juniors need to be realistic about their projects. They need to ask themselves how a potential buyer would be able to easily add value to what has already been done, then consider how much capital that will take and, importantly, how many would-be acquirers actually have the capital to spend and the desire to spend it in that particular jurisdiction.
That need to demonstrate not only ‘blue-sky potential’ but also exactly how one can get there in the shortest time possible, was very much a theme that ran through many of the presentations throughout the course of the conference.
On the same panel, Jaimie Strauss of Strauss partners agreed, saying M&A is always the easy answer, when the question is “who is going to bail us out of this downturn?” but, he says, such a bailout is unlikely in the short term.
“The large companies that did the buying in the past are not doing much M&A right now because they are trying to cut costs and strengthen their own balance sheets.”
Instead, he says, juniors need to look after themselves; they need to carry on focusing on delivering on what they have promised and ensuring what they are trying to do is realistic.
But, he adds, “at the same time you have to look at the cyclical nature of the industry and that says that majors are eventually going to need to acquire assets because they need to replace their depleted reserves.”
This juxtaposition, in many respects, sums up the conundrum facing the sector at the moment, there is a belief that things will eventually get better, but with that, there is, increasingly, a recognition that it isn’t going to be instantaneous, nor will it be easy.
Or, as Ivanhoe founder Robert Friedland, put it, “You have to have the courage of your convictions, we have to be thinking 2019, 2022 as if it were tomorrow. It is an ugly, long-term, difficult, 19th century business, but anyone who tells you the supercycle is over is an idiot.”