TORONTO – Canada’s junior mining sector is seeing renewed confidence as market capitalization rose, according to PwC Canada’s Junior mine 2017 report released on Nov. 6. Capitalization of the top 100 juniors on the TSX Venture Exchange reached $12.2 billion, up 7% from $11.4 billion for the 12-month period ended June 30, 2017.
Mining is the dominant industry on the TSXV, accounting for 47% of the total value in 2017.
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 again putting their 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 $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.
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.
Despite metal prices that have slowly climbed off the lows of two years ago, cautious producers remain wary of starting new mines. The lack of capacity could be a boon to commodity prices; that would in turn bring more investment to the exploration and development sectors.
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