(Kitco News) - The retail investor is absent from junior mining, but strategic investments by larger companies are helping, said Brent Cook, founder of Exploration Insights.
In mid-January Cook and Exploration Insights’ editor/ analyst Joe Mazumdar spoke to Kitco Mining at the Vancouver Resource Investment Conference 2024.
“There’s no new real money coming into the sector,” said Cook, noting that many traditional mining investors have retired or have died, while the younger blood tends to invest in areas they know more about, such as tech.
Mazumdar said part of the negative sentiment comes from that fact that if investors can make 25 to 30% on index funds, “why bother with speculative investments?”
“The bigger money is starting to look at the sector but anything under 100 million [market capitalization] is too micro because we have the problem of liquidity in our sector,” Cook said.
Asked whether the absence of retail investors is killing the sector, Mazumdar said “it’s the lack of institutional equity, those funds have all been shrunk or disappeared because the family offices are taking money away from them and investing in ETFs… institutional ETFs are not funding the private placements so there's not a lot of private placements being done because they're not anchoring them.”
Cook pointed to Barrick Gold’s (TSX:ABX) $23.3 million investment in Hercules Silver (TSXV:BIG), following the latter’s porphyry copper discovery in Idaho, as evidence that the majors need the juniors to make new discoveries.
“What that tells me is [Barrick CEO Mark] Bristow up top is saying ‘look I want copper; I want a new discovery and I want it in a reasonably safe jurisdiction. Go find me something and that's what they're doing.”
Other examples of strategic investments include Agnico Eagle Mines’ (TSX:AEM) $23.1 million deal with Canada Nickel (TSXV:CNC), followed by US$18.5 million invested by Samsung SDI; and Sumitomo Mining’s $14.4 million private placement in FPX Nickel (TSXV:FPX). China’s Zijin Mining recently put $130 million into Solaris Resources (TSX:SLS), developing its Warintza copper project in Ecuador.
“There’s a need for these projects, you look at the major mining companies’ production profiles they're almost all going down,” Cook noted.
Mazumdar said because of issues with financing, a lot of drill programs aren’t getting funded. “But with money from an outside strategic investor that understands the geology, that program could still get funded. There's more of an underlying commitment to see what's there and so there is definitely sort of a move to do that,” he concluded.
Coverage of the Vancouver Resource Investment Conference 2024 was sponsored by Snowline Gold.