Things are turning up on the TSX Venture. In fact, I’d be willing to bet things haven’t looked this good on the TSX Venture, particularly for junior miners, in years. One look at IPO financings on the TSX Venture tells the story.
According to the TMX Group, IPO financings on the TSX Venture totaled $48,469,551 year to date through May 2017. This represents a 420% increase from the $9,306,360 raised in the previous year through to May 2016. The majority of this capital has flowed into the junior mining sector as more than 60% of the exchange is dominated by mining-related issuers. As a result, exploration this season will be robust and is likely to produce new discoveries. New discoveries promote interest, spark positive news cycles and result in more money raised. Furthermore, when liquidity for financings dry up, cycles can turn negative or have a reverse effect.
Gold Miners Bet $290 Million on New Discoveries Through Investment in Juniors
A report by CIBC World Markets confirmed money is flooding into junior miners on the TSX Venture. IPOs aside, “Gold miners have invested around $290 million in exploration companies during the first six months of the year…”
In a Financial Post article Sunny Freeman confirmed, via the CIBC report that the $290 million was, “the highest level recorded in the past decade and double the value invested in the previous two years combined.”
While, 2015 was one of the worst years on the Venture, 2016 was an improvement. The TSX Venture officially bottomed in January of that year at 466.
Freeman went on to explain,
“Production at gold companies covered by CIBC is expected to rise modestly to 40 million ounces by 2020 from 37 million ounces in 2016, then decline each year based on the bank’s forecast for existing mine life extensions and new project development.”
Junior Miners to Benefit from Peak Gold
We wrote about declining production back in May of 2015, in Peak Gold in 2015?
“Statistically, the world hit a peak in gold discoveries (based on new ounces discovered in a calendar year) in 1995, according to a recent Goldcorp PowerPoint. For twenty years now we have seen a steady downtrend in ounces discovered annually. It has gotten so bad that in 2013 we only discovered approximately 10% of what we did in 1995, according to Goldcorp. That’s a shocking statistic.”
Check out the below image from Goldcorp’s power point.
Click here to read Peak Gold in 2015?
Because, the previous bear market lasted about five years, the pipeline for future production is not strong. Most mining projects take between 10 and 15 years to develop into production. This bodes well for a multi-year bull market in the miners.
2017 | Big Year of Exploration for Junior Miners
Drills are turning on sites from Thunder Bay, to New Brunswick, the Yukon and all over Alaska and British Columbia. Junior miners, having enjoyed a $290 million injection from majors thus far in 2017, will soon be reporting results to the market. A significant discovery could lift the entire TSX Venture higher; hence, 2017 will be a critical year for junior miners as company CEOs work to define the next mineral structure.