Taking the current ongoing disruption, as a result of Covid-19, into account, private investment company Long State Investment associate Jessie Chen expects a bright future and positive outlook for junior mining companies over the next 12 to 18 months.
In a Mines and Money-hosted webinar and panel discussion on September 3, she elaborated that, the next year was likely to be a very busy one for junior miners, especially as global junior mining activity had been temporarily suspended owing to the pandemic and related restrictions.
She believed that, as a result, junior miners were likely to start 2021 off with better financing prospects, particularly as many travel restrictions and physical distancing requirements would have been lifted by the start of the new year.
Exploration was also likely to fare well as many junior miners had to halt exploration programmes during this year and these would likely resume in the new year, Chen said.
In terms of financing activity for junior miners, she added that capital injection levels continued to rise. As an example, Chen mentioned that, for junior mining, in the second quarter of this year, raised capital amounted to about $1.8-billion, which was higher than the $1.6-billion raised in the second quarter of 2019.
Additionally, Chen said there had also been an increase in merger and acquisition activity in the junior mining space owing to the pandemic.
“This year has seen the highest number of deals since the third quarter of 2018 and I believe the number will continue to go up, especially for gold junior mining companies,” she commented.
However, Commodity Discovery Fund CEO Willem Middelkoop noted that the big change over the last year had been that of the window of opportunity towards financing.
He explained that the market sentiment had leaned towards that of “more generalist people” coming back to the market, meaning that there “are people who have even more money to spend”.
Supporting Middelkoop’s comments was ValOre Metals Corp CEO Jim Paterson, who said that while last year’s subdued investment activity was likely out of “apathy or a fear [of investment]”, this year’s substantial increase is because of the “fear of missing out, or Fomo".
He cautioned people against investing too much in the middle of the downturn, saying it was already difficult for companies to raise money to prioritise business and exploration plans, “which really have to make sense”.
“Right now, with everyone in a sort of state of Fomo, everything is getting financed, which can lead to a train wreck down the road,” he warned.
Paterson urged investors “not to worry” if one did not get into every financing opportunity. He rather cautioned investors to “choose [their] groups to back” and urged investors to remain careful.