Junior Exploration Spending Drops

Source:

"Juniors must spend more on exploration or there'll be shortage of new projects."

Canadian juniors need to spend more money on exploration, or there will be a shortage of new mining projects, PwC national mining leader John Gravelle said last week.

This was after the advisory firm released report, called Junior Mine, which showed a 31% drop in exploration spending for the 12 months to June 30 to $64 million from Canadian firms listed on the TSX Venture exchange (TSX.V).

"That was a little disappointing. I would hope they would continue to raise money to do exploration work," he said in an interview.

"That number does need to go up."

Gravelle said that despite the rebound in commodities prices, it was still challenging for juniors to raise financing to carry out early stage exploration, as investors avoided risk.

Nearly 60% of the world's total mining listings are on either the TSX or the Venture exchange.

"The demand side has shown it is there, we need to get more new projects," Gravelle said.

Juniors around the world suffered heavily in the wake of the recession, when access to funding dried up, making it difficult to finance exploration. While there has been an improvement, investors aren't as ready to hand over money to pure exploration companies as they were before the collapse, he added.

Gravelle said that the trend of companies graduating from the TSX.V to the main board was likely to continue.

"As more companies get to the stage where they need substantially more capital to build their mines, they will look to move to the TSX," he said.

Gravelle noted that companies don't just consider moving to the main board because they reach a market capitalization over $1-billion.

"You get to that size because market has confidence in your projects," he said.

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