A look at recent junior IPOs suggests veteran teams with solid exploration backgrounds and credits to success are where the money's at.
The appetite for junior exploration IPOs on the TSX Venture is what you might expect it to be these days. Not very hungry. A quick round-up of recent IPOs on the Venture shows that only one among new IPOs in June and July (since we last visited the subject) broke the million-dollar barrier, Precipitate Gold, a junior explorer that holds property options and concessions in the eastern Yukon and northern British Columbia (BC).
What the shape of June and July IPOs illustrate more than anything else is that pedigree counts now more than ever. Far and away the better known names involved with the recent IPOs (table below) are in Precipitate's stable. That Precipitate raised the most in the recent round of IPOs suggests what little money is going to the heavily favored veteran teams.
In Precipitate's case this is a fairly stacked list. Adrian Fleming, who played a key role in Underworld Resources as the company's CEO in the run up to Kinross's takeover of it, is Precipitate chairman. Gary Freeman, of Ethos Capital, another Yukon explorer, and Quinton Hennigh, who headed up Evolving Gold, are both on the board of directors. In management, Darcy Krohman, who was a senior mining analyst with the BCSC and former vice president of exploration for Timmins Gold and Silvermex Resources, is president and CEO. And the driving forces behind founding Precipitate were the late David Coffin and his brother, Eric Coffin, of HRA. Eric and David's estate are now the company's top shareholders and both of them helped pick key Precipitate properties, some of which are under option from Strategic Metals, a major Yukon explorer.
But, even with such solid names behind you, it isn't easy to hit the ground running. As far as junior IPOs go, the latest batch in view here are not able to embrace former U.S. president George W. Bush's philosophy, "Drill, baby, drill." With budgets of a few hundred thousand dollars in play, and the knowledge financing markets are tough, most of the stated exploration plans are very modest, involving boots on the ground more so than drill bits into it.
Indeed, even Precipitate looks to be treading more carefully than it envisioned just months ago. It had said in its prospectus it planned to punch a few drill holes into its Reef project in the eastern Yukon this year. Since its IPO, however, Precipitate has retreated on drilling plans in 2012. A Precipitate spokesperson described downsized goals given the state of financing markets. Instead of drilling this year, Precipitate is to expand on soil sampling instead. It doesn't want to burn through all its cash, and meantime it wants to keep its options open as far as acquiring new projects.
This turn of events underscores how capital preservation is becoming ever more important to survival in the junior market. Financing options are severely limited and, if you need cash, juniors have increasingly become more creative in scrounging up exploration shekels. If you have a non-core asset, you sell it. If you must resort to debt, you secure it against your main asset.
And clearly if you have cash these days, you spend it sparingly and hold out for friendlier horizons to appear where, hopefully, financing loosens up and you can break out the big plans. Until then it continues to be a waiting game. In fact, about the tough state of junior affairs in sourcing cash for exploration, it was Eric Coffin that recently said in The Gold Report, "I suspect a lot of companies are going to say, 'Let's just wait and see if next year is better.'"