Canada’s junior mining industry must adapt to survive amid low commodity prices, a lack of available financing, and dropping market values, according to a report released Tuesday by PwC.
Canada’s junior mining industry is “caught in the midst of an unparalleled downturn”, the PwC report says, as commodity prices remain low and the global economy is shaky.
The top 100 junior miners raised $515 million in equity financing in 2015, which is down 25% from the previous year; and, 86% of the total was raised by just 15 companies, the report notes.
Debt financing declined by almost 27% in 2015 to $278 million, the report says, and two-thirds of that total was raised by four firms. “For the vast majority of junior miners, traditional sources of funding simply aren’t available in this environment,” the report says.
In addition, the market capitalization of the TSX Venture Exchange’s top 100 miners has also dropped significantly, the report says. It notes that the combined market cap has declined from $7.9 billion last year to $4.8 billion at June 30, and overall revenue is down 28% from 2014.
In this environment, junior miners need to take urgent action, the report says. “Barring a sudden and unexpected turnaround, many miners will soon face the risk that they will run out of cash, despite their best efforts to keep costs as low as possible. The ‘bunker’ mindset may have outlived its usefulness; waiting is no longer a viable strategy in these still-troubled times. For junior miners, it’s time to act,” the report says.
The report suggests that junior miners will have to look for innovative ways to help preserve their businesses. “New innovations such as data analytics, drones, and 3-D printing can completely transform mining, while fostering collaboration can help miners overcome challenges,” it adds.