TORONTO Some junior mining companies have had to enter "survival mode" due to a lack of interest from potential financiers, First Nickel Inc. (FNI) president and chief executive officer Thomas Boehlert said.
The investment sector has cooled noticeably on mining in recent years, as evidenced by a fall in stock prices far beyond recent drops in metal pricing, Boehlert said during AMM sister publication Metal Bulletins International Nickel Conference in Toronto.
"Theres hardly any money available for junior miners in the market, and that is going to drive a lot of junior miners into survival mode: selling assets, strictly conserving money and investing almost no money in exploration. That is likely to create a shortage of supply as we head into the coming years," he said.
Boehlert discussed his own companys push for financing earlier this year, in which FNI restructured its debt with shareholders after acknowledging that it was "in serious financial difficulty" (amm.com, April 1).
Boehlert said that the Toronto-based company made the move after coming into the end of 2013 with only Canadian $5 million in cash, well short of its objective to "always have C$10 million cash on the balance sheet."
"We got to the end of the year and the liquidity looked pretty tight, and in our first quarter we were going to have an issue," he said. "The refinancing got done because our shareholders stepped up and provided loans and credit support. If we had tried to go out into the market and do that kind of financing, it would not have been possible."
Boehlert said that the dearth of investor interest in junior mining companies is likely to continue until metal prices improve, with many now expecting nickel prices to climb as the supply surplus eases toward the second half of this decade (amm.com, April 30).
He added that many mining companies looking at potential acquisition opportunities were likely to concentrate their search on companies with a "producing asset" already in place, rather than in-development or exploration firms.
"You cant acquire assets that require more investment, because theres just no capital out there," he said.