Mining juniors are getting their finances, finally
Higher gold prices boosted interest in exploration companies, and investors aiming to support that work, noted Mike Labach, who represents investor relations for Taiga Gold Corp., and Eagle Plains Resources.
The higher prices justify spending more searching for gold, renewing “market interest in our industry after close to a decade of downturn,” he wrote over email.
Western Copper and Gold CEO Paul West-Sells says investment is finally flowing to junior resource space. Last week the junior financing tracker, Oreninc, said its index leaped to a three-year high.
“There’s more money out there than companies needing to rise, which is pretty rare in our industry,” said West-Sells, who received renewed investor interest when Western Copper and Gold announced a significant resource increase earlier this month.
Last month West-Sells’ company, which is developing the Casino gold project in the Yukon, raised $C4.48 million in a non-brokered private placement. The rise in copper and gold prices is helping, too. Last Monday copper hit a two-year high at $6,633 a tonne.
“Here we are now in a frenzy. Literally, a frenzy,” Warren Stanyer, CEO of ALX Resources Corp., said. “Junior mining companies are getting millions of dollars from bankers and investors because everyone thinks gold’s going to go a lot higher.”
He attributes that hike to the uncertainty roiling the economy. Governments issuing more money and entering into more debt, he said, strengthened gold and helped cash flow for firms like his.
An insider said, silver, not gold, was the stand out this week. “The precious metal you want to look at is silver. Silver is taking off, and it pushed above $19 oz last week,” said Neils Christensen. “It’s kind of exciting to see.”
Another issue is the durability of these prices. For one, Alfred Stewart, vice president of corporate development at Searchlight Resources Inc., was confident high prices were sustainable, noting their relationship to government responses to the pandemic.
“Now things are beginning to boom. It’s been pretty good in June and July. And we’re seeing a lot of financings in the junior market, and a lot of activity,” he said.
The reliability of any predictions during COVID-19 is, however, questionable.n“Anything you thought was a good predictor of what’s going on is probably off the table at this point,” he said, adding spikes in gold likely stemmed from that uncertainty.
Prolonged high prices would make exploration more valuable, easing cash flow for companies looking to invest in junior miners on the hunt for deposits.
If those prices are sustained, that could also in the long-run bring jobs. It could further diversify the economy after COVID-19 revealed the vulnerabilities of not doing so.
Despite the jump in gold prices, there is also a valuation gap between junior companies and their larger counterparts, noted Brian Skanderberg, CEO of GFG Resources in Saskatoon. He added, most junior explores aren’t seeing their valuation materially change. On the other hand, operating mines are doing well.
