TORONTO Junior base metal
mining companies are finding it tougher to obtain financing,
with more merger activity likely as companies seek to mitigate
risk, according to delegates at the Prospectors and Developers
Association of Canada (PDAC) convention in Toronto.
Many delegates from junior metal
mining companies told AMM that it is difficult to find
funds in the current economy, with talk of a "capital strike"
difficultnear impossible. But good projects with good
potential that are well managed always raise money," said
Luquman Shaheen, chief executive officer of Panoro Minerals
Ltd., Vancouver, British Columbia
These thoughts were echoed by
Sandstorm Gold Ltd. chief executive officer Nolan Watson.
"Its a tough financial market out there for mining
companies, but there is capital out there for good projects,"
he said in a March 5 presentation. "Just like the only way
youre going to get the girl is if you convince her you
dont need her, the only way youre going to get
equity financing is to convince people you dont need
Tight capital markets mean that
"juniors may have little choice than to consider mergers
of equals," according to PricewaterhouseCoopers LLP
Transaction Services partner John Nyholt.
"We expect to see more mergers
and (joint ventures) as companies are less likely to go it
alone on a big project," he said, citing HudBay Minerals
Inc.s Constancia copper mine in Peru as an example of a
company looking to mitigate risk by finding a partner in the
Nyholt added that while "deal
activity will remain low" in 2013, his company expects to see
more major mining companies divesting noncore assets.
"Its all about sharpening the focus of the company and
reducing overall risk," he said.
Meanwhile, Watson presented
research suggesting that companies that say their mine projects
will be completed within a year are wrong 78 percent of the
time, and even projections of eight months until completion
typically run an additional eight months from the forecast
"If you are building something
complex, it will take longer than you think, it will cost more
than you think and it will not work the way you expect it to
when you get it started," he said.