Junior miners are increasingly looking like a conveyor belt of sushi to major miners who are sharpening their chopsticks in readiness to pick off the tastiest morsels as quickly as possible in a half-price all you can eat buffet.
This is the view of Oreninc MD, Benjamin Cox who does not see the bad times for juniors coming to an end until September at the earliest and, when it does, it is going to involve a large amount of change.
Speaking on Mineweb.com's Metals Weekly podcast, Cox explains that the financing market has disappeared for juniors for the time being and everyone has gone on holiday.
He says that one has to look at the junior market from a supply and demand point of view and in the Northern Hemisphere autumn even if there is a recovery, it is unlikely to be sustained because of the sheer pressure from companies queuing up to get financing.
"You would need the recovery of all the recoveries to make up for the last year's lack of financing. It's going to take six months, nine months to a year to work through this backlog, even in the good markets... we're going to need to see some corporate failures, we're going to need to see some juniors disappear, we're going to need to see some new juniors come out the woodwork and we're going to need to see a fundamental shift in what the market is."
For Cox, the reason for the current state of affairs is three fold. The first, in his view, is the sheer overabundance of juniors, especially gold juniors.
"We got to a point where we had more gold juniors than we could ever possibly deal with from a total support financing perspective and that really wore out the gold investor."
The second reason is the slowing of growth in China. He says, it is infinitely harder to grow rapidly from a large base than it is from a small base and the Asian power house is starting to get to a point where much of the country has now "been built".
"It's like the 1890s USA - the railroads had been built, now they're going to have to step up the value chain, let the value chain change."
The third reason Cox cites for the slump in the junior market is the macroeconomic malaise in Europe. Investors, he says don't like the level of uncertainty emanating from the region.
"The fact is the European establishment has pretty much sent the euro down the river and I don't know if the euro will survive it. No one likes it when a major currency dies - it doesn't help financial markets."
What will trigger recovery?
For Cox, the recovery is likely to come when the majors jump back into the market, in a similar way to the manner in which ArcelorMittal came in and bought BAffinland, which helped trigger the previous recovery, Cox believes that there are likely to be a lot of acquisitions, especially of gold juniors start to come through.
"We spend a lot of time talking to majors and they are definitely sharpening their chopsticks, and they're looking at the tender little pieces of sushi and saying ooh, do I want that one, or do I want that one."
He adds, the problem they [the majors] have is the sheer number of juniors on the conveyor belt. "There are just too darn many of them, and they're all cheap. So it is going to take a few months for them to decide what their menu is, and then they're going to need to start going out and eating them."
Winners and losers
From a majors' point of view, the fall is looking like an exciting time because, as Cox points out, you can't sink drill holes for less than what these juniors are trading at.
"I see majors standing there and saying wow, we can replenish our ounces and tonnes in the ground for the cheapest amount we've ever been able to do it. Even if they offer a 50% premium to current share prices it's still at 70% discount to historical share prices."
But, he adds, "We'll see a lot of companies that should have been taken out at the top of the market getting taken out the bottom of the market - its healthy in one way in that it returns capital but unhealthy in another way in that it basically means that people are forced to sell out at the bottom of the market."