Equity markets sour on junior mining sector – report

Financing for global mining and exploration lost momentum in 2018 with equity markets in particular shunning the metals and minerals sector according to a report released on the eve of mining's biggest annual gathering in Toronto, Canada.

State of Mining Finance 2019, produced by the Prospectors and Developers Association Conference (PDAC) and junior financing tracker Oreninc, paints a grim picture of mining and exploration companies' ability to attract capital, citing metal price weakness last year as a main driver behind the decline.

Source: State of Mineral Finance 2019

Mineral industry equity financing in 2018 dropped by nearly 35% from a year earlier to establish a new decade low for both total value raised and number of transactions completed according to the report titled At a Crossroads.

While funding earmarked specifically for exploration remained above the lows of 2013 and 2015, it more than halved last year to $4.1 billion. That's also less than ¼ of the peak hit in 2012.

Source: State of Mineral Finance 2019

Nothing ventured nothing gained

Toronto's stock exchanges managed to bump its share of global exploration capital raised to 44%, but  juniors hoping to raise money on the TSX and TSX-V found it tough going.

The value of equity raised by juniors on the TSX and TSX-V decreased by 58% and 23% in 2018 respectively. A drop in the number of transactions to 83 from 151 on the TSX and on the TSX-V to 885 from 1,178 also suggest a narrower distribution of funds across market participants.

Most concerning for the industry is the 60% year-over-year drop in bought-deal financing for junior explorers to just $600m in 2018 from $1.5 billion the year before.

This is the lowest figure recorded in a decade and since bought deals inherently exposes underwriters to high levels of risk it "hints at a lack of sector confidence by large brokerages," according to the authors.

Source: State of Mineral Finance 2019

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