Survival Of The Fittest

Posted by Peter Grandich via Resources Wire

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Peter Grandich on the Future of the TSXV. Resources Wire editor Kevin Michael Grace interviewed Peter Grandich March 14, 2013. In this second part of that interview, Grandich discusses the prospect for junior miners. (See Part 1 Gold Has Not Peaked HERE)

RW: The PDAC Mining Conference was in Toronto last week. I read all the stories coming out of it, and it was like hearing from members of the German High Command in January 1945. That’s how bad the sentiment was. We’ve been talking about a bottom in mining equities for quite some time, but every time we supposedly hit the bottom, there’s another bottom.

15-sentimentPG: The good thing going is that there is nothing good going at the moment. That is really the only positive thing I can say now. There is such an overwhelming amount of bearishness, and the last of the enthusiasm from people that kept hoping there would be a bottom has disappeared. I hear this from mainly retail investors, but I wouldn’t be surprised if professional investors feel the same way—even when there is a rally, they just want to get out of mining stocks and never see them again.

What we have going for us is that there have been, I think, 11 or 12 bear markets in juniors over the last 30 years, which is the amount of time I’ve been in this, although this one is clearly the most severe.

There was a sense of hopelessness—that we could never get back to former heights.

But those markets recovered, and so the question is whether this time the market will recover as well.

There have been structural changes that make it harder to operate, and these will probably cap the type of rebound we can have.

One thing is absolutely certain. For the rest of 2013, it will only be the type of deals that are closer to the top of the pyramid that can move forward. Companies with advanced-stage deposits or already transitioning into development or production will see the bulk of whatever dollars are available for financing. The smaller, earlier-stage exploration deals, no matter where they are, no matter what the structure of the company is pricewise or the amount of shares outstanding, will suffer greatly. Financing will go to those companies that can go into production, as opposed to the swing-for-the-fence companies in early-stage exploration.

I think we’ll see a one-tier recovery in the juniors. It’s sad to say, but a lot of them will cease to exist. That’s providing that the Toronto Stock Exchange doesn’t lower its listing standards so it can still collect money, so that that on paper these companies can exist but will have no real life outside of that.

RW: John Kaiser thinks a cull of 500 companies would be a good thing, but he adds that things have come to such a pretty pass it’s possible that the TSXV itself could die.

PG: I don’t know if it would die, but that’s what I was getting at. Knowing what I know about how exchanges are run, they will look to lower the standards to continue to bring fees in. Hundreds of companies will disappear, but some will find the old route that’s always been taken by companies: rollbacks, changes of names and new projects. But the difficulties those guys will have is there won’t be the ample refunding dollars that are normally available.

… pages 2 & 3 HERE