Credit Crisis Makes Precious Metals Juniors Prime Acquisition Targets

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Haywood sees an upside in the current financial dilemma of junior miners and explorers. "With valuation at compelling levels, the junior precious metals sector is a prime acquisition target that we expected to materialize once a semblance of stability is restored within in the broader markets."

In an industry comment published Thursday, Haywood Securities advised the impact of global financial crisis on the junior mining and exploration sector "has been devastating" sending share prices spiraling down 52% year-over-year.

"Disinterest in the sector is obvious given unwinding of the global financial markets with no clear bottom in sight. With the investors questioning the security of their savings it is understandable that the risk/reward profile of the junior sector has fallen out of vogue," Haywood noted."...

In an analysis published Thursday, Haywood Mining Analysts Andrew Kaip and Kerry Smith warned that "we believe that the junior precious metal sectors' ability to achieve core objectives will be impacted over the next 12 to 18 months. The immediate impact has been a reduction in financing capacity with mining related financing down through H1/08. For those companies successful in raising new equity, we expect this to be achieved at the expense of significant dilution."

"For those junior precious metal explorers with projects nearing a development decision, we believe that financial conditions for project debt financing will either include more onerous terms, including high interest rates, increased hedging obligations or other covenants. Projects that are currently attempting to raise debt will meet incredibly tough bankers-some of which have stopped lending to the sector altogether. It is possible that a worsening of the credit crisis could close the project debt window entirely," they cautioned.

...Nevertheless, Haywood sees an upside in the current financial dilemma of junior miners and explorers. "With valuation at compelling levels, the junior precious metals sector is a prime acquisition target that we expected to materialize once a semblance of stability is restored within in the broader markets."

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