Junior gold miners seeing windows of opportunity

Few sectors have been as hard hit as the junior miners by last year's market collapse but capital raising opportunities are occurring, particularly in the gold sector

Author: Pav Jordan
Posted:  Friday , 26 Jun 2009

TORONTO (Reuters) - 

Junior miners in Canada need to watch the swings in commodity markets to best gauge the timing on forays into capital markets, where windows of opportunity are opening after a long drought, investment bankers say.

Few have been harder hit by the global recession than the small miners and explorers that depend so much on external financing to survive until they can discover the mineral troves that can be sold on to bigger players.

Now investment bankers say financing is trickling back into the market, especially for companies that can prove they have minerals in the ground. But to do so, juniors must seize their opportunity before an unexpected market shift.

"The best position to be in is one in which you are ready to hit the market when one of these windows of opportunity opens," said Neville Dastoor, vice-president of investment banking at Canaccord Adams.

"We have at least seen quite a bit more money that is interested in more early-stage type opportunities coming into the market, which is very promising from our perspective," he said at this week at the MINEAfrica convention in Toronto.

That should encourage junior companies -- at times just two- or three-man teams who brave steamy tropical jungles or oxygen-starved mountain slopes in search of the next great mineral find.

Miners with no proven resources or reserves are at the bottom of the totem pole for investors.

"We're seeing cases where, if you are six to 12 months from cash flow, then your project is more desirable than, say, when it's a little bit more grass roots and needs a little bit more work," Mike White, a vice-president at boutique firm IBK Capital Corp, said at the conference.

GOLD LISTINGS

Gold miners are among the best placed for financing. The precious metal has gained value during the recession, and it's now trading well above $900 an ounce.

Prices benefited from U.S. dollar weakness and the desire by investors for a safe haven from economic turbulence. As a consequence, markets welcomed even new producers of the metal.

"The price of gold is moving up, so we're seeing a number of companies with gold properties listing because they are able to raise the funds to pursue those opportunities," said Tim Babcock, the director of listed issuer services for the TSX Venture Exchange, home of many junior miners.

"At the beginning of the year we didn't see a lot of that interest trickle down, but now we are seeing opportunities more broadly," Canaccord's Dastoor told Reuters on the conference sidelines this week.

Investment bankers say gold, silver and potash are minerals drawing investor dollars. Even industrial metals such as copper, whose prices are much more sensitive to economic turbulence, are starting to attract investment dollars.

They also say financing is becoming more available for miners at earlier stages in the production cycle -- as companies that already have cash flow become more expensive.

The return of available capital has helped small players such as Rimouski, Quebec-based Ressources Appalaches (APP.V: Quote). This week the junior gold miner completed a C$347,000 ($300,000) private placement to help develop its Dufferin mine in Nova Scotia.

Messina Minerals (MMI.V: Quote), a Vancouver-based zinc-lead explorer, recently announced a C$250,000 stock issue to fund exploration on its properties in Newfoundland and Labrador.

According to the Venture Exchange's Babcock, mining sector activity in capital markets increased in the first five months of 2009 versus the same period last year.

He said much of the capital raising came about through the exchange's so-called Capital Pool Company (CPC) program, a reverse merger listing vehicle that helps companies take projects public faster than the IPO (initial public offering) route.

A CPC listing can take as little as four or five weeks to complete, though usually takes between eight and 12 weeks. An IPO can take a lot longer and have more demanding financing schedules and stipulations.

"If there's a CPC there and you have a private mining asset and you want to take it public, it allows you almost to time the market," said Darrin Hopkins, director of corporate finance for Richardson Partners Financial Ltd, an independent Canadian wealth management firm.

($1=$1.16 Canadian) (Editing by Frank McGurty)

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