TORONTO – Market capitalization in Canada's mining sector has decreased 45% over the course of 2013, according to the publication Canadian Mining Eye: Q4 2013 published by Ernst & Young (EY). In the fourth quarter alone the drop was 9% as global economic growth remains shaky and uncertainty surrounds the US Federal Reserve stimulus program.
The report goes on to say that falling metal prices spurred significant write-downs in the value of assets across the sector. That left companies reluctant to raise equity capital on dilutive terms. Across the sector they raised approximately $6.9 billion in Q4 2014, down 49% compared to the same period a year earlier.
EY says these market forces are already setting the stage for a "modest" year of transaction activity, growth opportunities do exist. In 2014 expect majors to continue to divest themselves of non-core assets; mid-tiers that have cash flexibility will take advantage of inorganic growth opportunities; and juniors with good quality assets will de-risk their project to attract interest from potential buyers.
The Canadian Mining Eye index tracked by EY examines Canadian mining sector performance of 100 TSX and TXSV mid-tier and junior companies with market capitalizations between $1.6 billion and $100 million. The latest Mining Eye can be read by clicking here.