Increased Investment, Rising Consumer Technology Demands Responsible for Renewed Confidence in Junior Mining Sector
06 Nov, 2017, 09:00 ET
- Market capitalization of the top 100 junior mining companies on the TSX Venture Exchange hit CA$12.2-billion, up 7% from CA$11.4-billion for the twelve-month period ended June 30, 2017
- Combined valuation returned to 2010 levels, but underperformed the TSX-V market overall, which gained 33%
- Mining remains the dominant industry on the exchange, accounting for 47% of the total value in 2017
TORONTO, Nov. 6, 2017 /CNW/ - Canada's junior mining sector is seeing renewed confidence as valuations rose for the second year in a row, according to PwC Canada's Junior mine 2017 report released today.
According to the report, upward trends in cash balances and deal activity were key indicators that the sector has moved into a delicate recovery period of cautious optimism. Investors in the top 100 mining companies on the TSX Venture Exchange (TSX-V) are pouring money into the sector, showing their willingness to embrace additional risk. Cash balances of the top 100 swelled 74% during the 12-month period ended June 30, 2017, reaching CA$1.57-billion, the largest amount in the last five years. While optimistic, investor enthusiasm remains selective, indicating that the sector has not fully recovered from the downturn.
The rising number of exploration projects, equity and debt financings, and mergers and acquisitions (M&A) all led to the sector's best performance of the past five years. Rising consumer demands for electric vehicles, mobile electronics and power storage—technologies that are dependent on old metals like nickel, lithium and cobalt— also contributed to the sector's overall improvement.
"When it comes to future growth in the junior mining sector, strengthening global economic conditions today bode well for higher commodity prices, but without inflation it may prove difficult for junior miners to maintain their positive momentum," said Liam Fitzgerald, National Mining Leader, PwC Canada. "Junior miners seem to understand that this is a period of delicate recovery and are taking a more disciplined and strategic approach."
The report cautions that the recovery cycle will remain choppy and will be driven by commodity prices. The link to commodity pricing has been apparent in several cases such as metallurgical coal growth due to robust demand for steel in Asia. Copper and zinc prices saw consistent increases year over year, and gold managed to sustain the gains it posted in 2016, due to the anticipation of rising inflation in the United States and growing geopolitical uncertainty.
"In the two years since most metal prices began a slow climb off their lows, cautious producers have built fewer new mines than normal. This could underpin commodity prices and help the broader junior mining sector raise more funding for exploration and development," added Fitzgerald.
Click here to read the full report.
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SOURCE PwC Canada
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