* Market caps of top miners on TSX-V down 43 pct in 2012
* Equity financings fall 41 percent
* Juniors eye more stream deals, foreign investment
Nov 5 (Reuters) – The value of the top 100 mining companies
on the TSX Venture Exchange has nearly halved in the last year,
making it increasingly difficult for junior miners to secure
financing through traditional means such as debt or equity
offerings.
As a result, Canada’s smaller mining companies are turning
to alternative forms of financing to fund growth, a PwC report
released on Monday said.
“Investors are skittish; wary of the volatile market. They
aren’t looking to add more risk to their portfolios,” the Junior
Mine 2012 report said. “Unfortunately for juniors, this is their
‘sweet spot.'”
Canada is home to some 60 percent of the world’s public
mining companies, with the TSX Venture Exchange providing a
source of capital for junior mining companies.
Despite historically strong metal prices, the broader mining
industry has sagged this year, as slowing growth in China and
economic uncertainty in Europe and the United States weighed on
investors. The cloudy outlook has hit smaller miners
particularly hard.
Equity financings by the top 100 juniors fell 41 percent to
just C$1.6 billion ($1.6 billion), in the 12-month period ended
June 30, 2012, down from C$2.7 billion in the year-earlier
period, the report from the global tax and accounting firm said.
Market capitalization plunged 43 percent, with just 13
mining companies on the TSX Venture Exchange worth more than
C$200 million in 2012, compared with 36 companies in 2011.
Not surprisingly, stream deals and other alternative
financings rose to 14 percent all financings in 2012, up from
just 8 percent 2011, according to the tax and accounting firm.
Stream financing is so hot that Sandstorm Gold Ltd,
which provides upfront money to miners in exchange for the right
to purchase a percentage of future gold production at a fixed
price, took the No.1 spot on PwC’s top 100 list in terms of
junior mining company market capitalization.
Sandstorm shares rose 40 percent over the 12-month period
ended June 30 and the company currently has a market cap of
C$1.16 billion. It is the second largest company on the TSX
Venture Exchange after Africa Oil Corp.
Foreign investment is also gaining momentum, partly as Asian
steelmakers invested heavily in Canada’s Labrador Trough iron
ore region, securing a mix of off-take, joint venture and equity
deals with exploration-stage companies. Off-take agreements
reserve a percentage of future production.
That trend is now expected to move into gold companies.
“Foreign investors are being strategic in the way they
structure investments – acquiring substantial economic interests
without having to acquire the public company that owns the
asset,” said John Gravelle, PwC mining leader for the Americas,
in a statement.
Copper Fox Metals Inc, last year’s top mining junior
by market cap, slid 46 percent to land in the No. 3 spot this
year, behind Sandstorm and Iberian Minerals Corp, a copper
producer.
Rounding out PwC’s top 5 of 2012 were Aurcana Corp,
a silver producer, and Dia Bras Explorations Inc, a base
metal and silver producer.
“Overall in 2012, producers were the only group who did not
face a significant decline in market capitalization,” said
Gravelle.
