If you can imagine the exploration boom-bust cycle as a clock with the bust at 12 o’clock and the boom at 6 o’clock, we are now sitting between two and three o’clock, when junior companies unable to raise cash since the bust of mid-2008 get desperate.
As they scrape the bottom of their treasuries, teaming up with cash-rich juniors to advance their projects begins to look like an attractive means of survival. Consolidation of the sector begins.
We’re already witnessing this phase on Toronto’s TSX Venture Exchange, the world’s largest bourse for junior mining companies. Several high-profile mergers have been brewing over the traditionally slow summer months: Mano River Resources is offering to buy African Aura Resources and its advanced stage gold and iron projects in Cameroon; Hathor Exploration is paying a premium over a competing bid for Northern Continental Resources in order to acquire control of the Russell Lake uranium project in the Athabasca basin of Saskatchewan; Orvana Minerals is set to buy Kinbauri Gold Corp. and its assets along the Rio Narcea gold belt in Spain; and directors from Lundin Mining are attempting to oust the board of Chariot Resources and wrest control of the company and its Mina Justa copper project in Peru.
Sector consolidation will mean fewer opportunities for geoscientists in the short term but is ultimately good for the industry: rather than have several companies limping along with good projects but no money to develop them, there will be fewer but stronger companies in a better position to take advantage of the next boom to reward their shareholders and employees.
The bust phase is characterized first by declining exploration, then by mergers involving share exchanges (e.g. Mano River-African Aura and Hathor-Northern Continental), and next by a rise in cash takeovers (e.g. Orvana-Kinbauri).
Finally, when new companies start launching IPO’s and floating their shares, you know the boom has begun in earnest.
Hang in there. Only a few more hours to go!