Juniors Do It Better than Seniors


"Research suggests juniors hold their own in discovery."


As PDAC unfolds here's a nice little toast to junior explorers in an analysis of exploration success by Richard Schodde, the principal at MinEx Consulting: They beat seniors at finding deposits, both by bang for buck and in the number of discoveries made.

"In the last decade juniors did a 30% better job," Schodde noted in a presentation covering the state of the Canadian exploration industry.

He broke down data covering 2005-2014. Seniors spent $12.5 billion on exploration in Canada, while juniors spent $14.6 billion.

While they put roughly the same amount of money into the ground, seniors only made 21 discoveries while juniors made 66 over the past decade. As Schodde calculates it the value discovered by juniors was $12.1 billion versus $7.9 billion for seniors.

In terms of types of discoveries the numbers, not surprisingly, were more evenly matched at the higher end of the scale of deposit size. In the past decade seniors edged out juniors in making discoveries of the larger Tier 1 and 2 deposits: 8.7 of them versus 7.3 for the juniors.

Still Schodde concluded, "It's a surprising result."

Consider it mild validation of the venture exploration model. Despite junior foibles—the so-called lifestyle companies where little money makes it into the ground but a surprising amount of its makes it into G&A among others items—they create more value through discovery than seniors.

It's somewhat surprising because seniors, clearly, have access to greater resources, but don't create more value for it. To be fair seniors do, as noted, find more of the type of the deposits they want—the big ones—while juniors, less discriminating, are open to drilling deposits of much smaller size (sometimes ad nauseum and to little effect).

But then, juniors nonetheless near match the seniors in this category and ultimately create more value for their efforts. It all suggests that the market is not that bad, after all, in allocating capital to juniors to make discoveries.

They can hold their own against the big boys.

Kip Keen

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