TORONTO (miningweekly.com) – The drying up of equity and debt markets coupled with new lows in cash reserves have pushed Canada's junior mining industry on a further downward financial trend, according to PwC's yearly report on the TSX Venture's top 100 junior mining companies.

But the industry was looking to innovate and collaborate in an effort to move forward, as bleak numbers led miners on innovative paths to disrupt the downturn, the professional services firm stated.

According to the ninth iteration of the junior mine report, ‘Time for Change’, the top 100 juniors raised C$514-million in equity financing in 2015, down 25% from last year, while debt financing fell 27% to $278-million over the same period. Despite attempts to reduce spending, cash reserves were found to be dwindling to new lows, as the top 100's on-hand cash dropped on average from C$10-million to C$7-million.

These numbers were paired with news that overall revenue was down 28% from 2014, a drop of nearly C$195-million, balanced slightly by an 18% reduction in overall net losses. The total market capitalisation dropped significantly from C$7.9-billion to C$4.8-billion as of June.

"The challenges in the junior mining sector persist and the industry is really at a crossroads. Despite the downward trend, we have seen some stories of true innovation this year – those junior miners who have moved from simply keeping the lights on, to transforming their business, have given us a glimpse into what could be a more optimistic future,” PwC's Canadian mining leader Liam Fitzgerald noted.

INNOVATION
Overall, this year’s top five company’s were significantly smaller than their 2014 predecessors – four of them would not have made last year’s list. Three firms were new to the top five this year, including Roxgold, Ascot Resources and NexGen Energy. They replaced Lumina Copper (acquired by First Quantum Minerals), Fission Uranium Corp (which graduated to the TSX) and Bear Creek Mining Corp, which slipped out of the top five this year.

While highlighting the state of the industry and its challenges, the report focused on the creative, less conventional steps taken by junior miners that had found success over the last year. The report broke the steps down into five categories.

It pointed to market aggregation as a way for miners to lower administrative costs, share risk and pool assets by region by combining forces, which could help put them in a better position for market resurgence. A prime example of this was Oban Mining, which, in August, consolidated the assets of juniors Eagle Hill Exploration, Ryan Gold and Corona Gold through an asset consolidation deal, with additional investment from Osisko Gold Royalties.

Juniors were also exploring ways to derisk projects, which saw project developers partnering with a major miner to help secure much-needed financing. Derisking projects through partnerships had played a key role in Premier Gold Mines’ recent mining activity. The company had partnered with Barrick, Goldcorp, Newmont and Centerra Gold to advance numerous projects in Ontario and Nevada.

Further, junior miners were looking at nontraditional financing, where they diversified capital through loans and pursued a syndicate of backers, which could help them accumulate the finances needed to move forward on acquisitions or other investments. PwC noted that some exploration companies were literally buying the cash they needed, by acquiring other companies.

“In the current market, it’s not uncommon to find firms trading below their cash value. Junior explorers willing to think differently about how to finance their business can take advantage of this opportunity to access much-needed capital,” the report stated, pointing to NovaCopper’s acquisition of Sunward Resources as being a financing deal more than an asset acquisition.

Meanwhile, distressed firms, which were deferring discretionary spending and keeping channels open with lenders during troubled times to help renegotiate financing terms during distress, could benefit from early planning to unlock value in difficult times. The report looked at how Jaguar Mining faced a liquidity crunch and debt challenges in 2013, before undertaking a restructuring and recapitalisation.

“Management and directors alike can unlock the value of their business and assets through quality financial modelling, giving them the information they need to ‘make the call’ before crisis hits and develop a clear plan on how they intend to deal with it,” PwC stated.

Embedding a culture of innovation, where new innovations such as data analytics, drones and three-dimensional printing could completely transform mining, while fostering collaboration, could also help miners overcome challenges.