VANCOUVER, Oct. 17, 2013 /CNW/ - The B.C. Securities Commission is releasing a report today entitled B.C. Junior Mining at a Crossroads: Executive Management's Perspective at its annual industry conference, Capital Ideas. The report was prepared by KPMG on behalf of the BCSC.
The BCSC commissioned the report to get a better understanding of why there is such a significant downturn in B.C.'s junior mining sector, and to help inform a discussion with industry about what can be done to support its recovery over the coming years.
Fifteen senior executives were interviewed on a confidential basis to get their thoughts on the current state of financing in the industry. Overall, participants confirmed that the majority of root causes and issues were due to the cyclical nature of the mining industry, and current economic and market conditions.
Significant contributing factors identified include metals prices; slow economic growth; global financial issues; the need for senior mining companies to rid themselves of "toxic assets" and problematic projects; and resistance to higher risk investments from both institutional and retail investors. Of lesser importance, but identified by those interviewed, were regulatory costs and policy barriers.
Participants generally agreed that while these regulatory and government policies should be addressed, this would not solve the current fundamental problem of raising capital.
Looking ahead, the interviewees believe that there need to be fewer junior mining firms in order for the sector as a whole to recover. Also, senior mining companies must clean up their balance sheets so that investors can gain confidence in the mining sector again, after which a recovery of junior mining companies will follow.
Several interviewees also noted that it is possible that Vancouver will lose some of its infrastructure (geologists, lawyers, independent brokers, accountants) that has traditionally served this sector and made it a mining centre of excellence.
The interviewees agreed that there were opportunities for securities regulators to improve and streamline their oversight going forward: to make sure that there is consistent review and compliance for all companies; and, to look for flexibility to reflect the disparity in the size and nature of companies in the mining sector.
The BCSC is the independent provincial government agency responsible for regulating trading in securities within the province.
SOURCE British Columbia Securities Commission