TORONTO (miningweekly.com) – Ask a junior mining company about the current hardships of trying to raise big money to build a project, and metaphors involving drawing blood from stones might ensue.
It should come as no surprise then that Halifax, Nova Scotia-based Metals Economics Group (MEG) found in a study announced Thursday that the dollar value of junior financings fell by nearly one-quarter in 2011 to $21.5-billion.
Perhaps equally predictably, not all metals took uniform hits.
No prizes for those guessing gold suffered less – juniors hunting for the yellow metal managed to tap markets for just 16% less than in 2010, as bullion prices continued their now 11-years-in-a-row upwards march. Gold financings actually increased for half of the months in 2011.
“As gold prices increased through most of 2011, so did investor interest, and after a slow start to the year, financings increased in number and size,” MEG said.
Base metals got caught on the wrong side of the European debt crisis, however.
Financings for this sector plunged 32% compared to 2010, as investors stood on the sidelines amidst wobbly copper, nickel and aluminium prices.
Junior mining companies are seen as risky places to put money into, given the high-risk, high-return nature of the game.
Although the findings of MEG’s survey paint something of a bleak picture for small companies hunting for new base metals mines, it could be worse.
Though the overall amount of money raised was lower last year, there were 410 financings of $2-million or more – a slight increase on the 395 number for 2010.
This shows “a sustained recovery from the low numbers and dollar amounts seen in 2008 and 2009”, MEG pointed out.
That does not mean that there are going to be any fewer junior mining executives desperately trying to catch the attention of investors with their pitches at the Prospectors and Developers Association of Canada’s convention that kicks off on Sunday.
Though markets have improved since the start of the year, promoters decked in their best suits are going to have to scrap for the little cash that’s going around.
Analogies of hoardes of hungry hyenas battling for the carcass of a skinny rat spring to mind.
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