Canadian Junior Mining Sector Showing Signs of Life

PwC Canada published its mining report, “Signs of Life” and cited positive signs such as the rise in the market capitalization of top junior mining companies, and increase in cash flow in debt and equity financing.

PwC Canada says the junior mining industry is showing signs of life, citing the rise in the market capitalization of top junior mining companies, as well as a 45 and 48 percent increase in cash flow in debt and equity financing respectively, as positive signs.
Also mentioned was that political and economic uncertainty globally inflated the gold price by as much as 22 percent, which provided some relief to junior mining companies.

A rise in market capitalization resulted in the gold rally

In the first half of 2016 there was a rise in market capitalization of the top junior mining companies on the TSX Venture Exchange, and mining companies make up over 50 percent of the total market capitalization of the exchange. Cash flows from financing activities also increased dramatically for the top 100 companies in the 12 months.

The result? A first sustained rally in gold prices since 2012. This has created new enthusiasm for junior gold companies.
Cassels Brock & Blackwell Partner, Mark Bennett says, “The good news for junior mining companies this year is that if they can execute on projects and sidestep the major risks, then the market appears more willing to reward their efforts.”
The report noted that the top 100 companies’ market capitalization surged by 138 percent to CA$11.4 billion, in the 12 month period that ended on June 30, 2016. However, the report suggested that the renewed enthusiasm does not necessarily signal the end to the painful downturn. However, it puts market valuations very close to 2012 levels.

Lithium on the rise

“Signs of Life” also highlighted that lithium is a metal “of rising importance on the exchange”, citing that five companies in the top 100 are lithium-focused, compared to only one in 2015. The five lithium companies in the Top 100 Companies were: Nemaska Lithium (TSXV:NMX), Lithium X Energy (TSXV:LIX), American Lithium (TSXV:LI), Wealth Minerals (TSXV:WML) and Pure Energy Minerals (TSXV:PE).

The top 10 of the 100 junior mining companies listed are as follows:

NexGen Energy (TSXV:NXE)
Roxgold (TSXV:ROG)
Kaminak Gold (TSXV:KAM)
Gold Standard Ventures (TSXV:GSV)
Gold Reserve (TSXV:GDRZ.F)
First Mining Finance (TSXV:FF)
Integra Gold (TSXV:ICG)
Nemaska Lithium (TSXV:NMX)
Bear Creek Mining (TSXV:BCM)
Chesapeake Gold (TSXV:CKG)

While it may be truly too early to tell if markets are in recovery, these positive signals hopefully will lead to a light at the end of the proverbial tunnel for the Canadian junior mining sector.
According to PwC Canada Senior Manager, Monica Banting, “Gold and the gold rally in the last six months has definitely changed things for the juniors.” She adds, “It’s tough to say whether this is the start of a sustained market recovery… we certainly hope so. But I think what we can say is that those junior mining companies that got creative in the downturn really demonstrated resilience… they are the ones that are still with us today, and they are the ones that have been able to raise money over the last twelve months and now have more cash in the bank and more options available to them going forward.”
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Securities Disclosure: I, Pia Rivera, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Nemaska Lithium is a client of the Investing News Network. This article is not paid-for content.