Das Schlimmste liegt hinter uns (nach Cannacords Ansicht)
Canaccord Adams: The worst for junior mining ‘is likely behind
Canaccord Adams metals analysts suggest that it may be time to
accumulate small cap/mining exploration stocks that offer good
Author: Dorothy Kosich
Posted: Tuesday , 23 Dec 2008
RENO, NV -
Although the small-cap mining sector "has just been through its
worst, most precipitous decline in modern history," metals analysts
at Canaccord Adams say they believe "the worst is likely behind
Nevertheless, they noted a sustainable recovery in the junior
mining sector will depend "upon the perception that an overall
recovery in global demand for metals in imminent."
However, that turnaround will "likely depend on the efficacy of the
government stimulus packages being implemented around the globe,"
"The year 2008 has shattered investor confidence, and market
valuations reflect risk-averse investor sentiment," the analysts
advised. "We believe that, to achieve a sustainable rally in the
junior mining sector in 2009, investors must regain confidence in
broader equity markets. "
"Given the ongoing issues in the global equity and credit markets,
we believe that investors are likely to remain somewhat risk
adverse. That said, opportunities to exist in the junior sector
even under more subdued investor interest."
Canaccord Adams stressed that, in the current environment,
investors should focus on companies with "balance sheet strength,
above-average project portfolios and strong management sheets."
Junior mining companies with strong balance sheets "are more likely
to survive prolonged sector weakness, which gives an investor an
opportunity to benefit when the rebound in junior mining equities
occurs," the analysts suggested.
In their report, the analysts outlined key mining sector drivers
for 2009 including:
• Base metals prices: "The global outlook for metals demand remains
grim." But low prices could be close to leveling off.
• Precious metals prices: "Credit concerns, a trend to further Fed
easing...political tensions, diversification of central bank
reserve holdings and the high US current account deficit all
suggest a strain on the US dollar, and therefore strength in
• Uranium: "We expect uranium to fare well through 2009 and beyond
as the current global fleet of 439 plants is expanded by 39 plants
under construction and as plans and proposal for an additional 379
plants are advanced; the price may be further enhanced as supply
• Diamonds: "This has been the least interesting sector in mining
over the past five years in our view. ...With metal prices off,
rumours suggest BHP and Rio Tinto are ramping up diamond
exploration activities. In addition, advanced plays by Peregrine
and Diamonds North could create renewed interest."
• US dollar: "As capital diversifies, will the U.S. dollar decline?
If so it could be good for all metals."
• The TSX and Dow Jones: "If the US has been in recession since
December 2007, we may have already seen the bottom of the market.
If we are halfway through the recession we have good hopes for the
markets in H2/09."
• The TSX Venture Index: While Canaccord Adams noted that the TSX-V
has been down as much as 80% over the last 18 months, "We think the
worst is over, but will the recovery be V-shaped or will prolonged
consolidation kick in before a sustainable recovery emerges?"
• Although the availability of capital has been constrained on all
levels, the analysts said they have witnessed successful equity
underwritings of several small to mid-cap equities. Nevertheless,
they advised that, until "a shift in sentiment towards explorecos
improves, we expect capital to remain tight among the small caps."
Canaccord believes equity raised next year for explorers and
developers "will be limited to above-average opportunities."
• M&A Activity: "We believe the circumstances currently
prevailing within the small cap mining space could open the
potential for a series of mergers and acquisitions. Compounding
this is the lack of capital available to juniors, which could be
also a motivating factor to build on the M&A environment."
• New Discoveries: ‘With fewer explorecos actually conducting
exploration work, the chances of a discovery in 2009 are declining.
That said an attention-grabbing discovery could have a greater
impact given the small circle of active explorers for investors to
• Industry Challenges: "Access to capital, declining metal prices
and an apathetic investment climate are serious concerns in
Given the unknowns associated with a broad junior mining market
turnaround, the analysts suggested that small-cap exposure "be
associated with well-managed, cash-rich companies that will
maintain active, but modest, exploration/development programs on
top quality targets over the next 6-18 months."
Canaccord Adams highlighted 12 small-cap mineral
exploration/development companies that have "strong working capital
positions, above-average strong portfolios and strong management
teams." They include B2Gold, Colossus Minerals, Exeter Resources,
Fronteer Development Group, Hathor Exploration, Lake Shore Gold,
MAG Silver, Minera Andes, Northern Dynasty Minerals, Rainy River
Resources, Silverstone Resources, and Ur-Energy.
The currently prevailing circumstances prevailing within small-cap
mining "create the potential for a series of mergers and
acquisitions," the analysts suggested.
"Mergers among the small caps could increase as management teams
become ‘humbled' by current market conditions and recognize that
combined entities could, in the long term, result in improved
shareholders value," they noted. "In other cases, the combination
of cash-rich companies with property-rich companies could
synergistically result in improved shareholder value."
"We expect additional M&A activity to drive some renewed
speculative appeal over the next several months," the analysts
advised. Canaccord Adams outlined several possible M&A
targets including Anatolia Minerals, Andina Minerals, Aquiline
Resources, Bear Creek Mining, Candente Resources, Canplats
Resources, CGA Mining, Colossus Minerals, Comaplex Minerals, and
Other prospective M&A targets include Detour Gold, Donner
Metals, GlobeStar Mining, Grayd Resource, Hathor Exploration,
International Tower Hill Mine, Minera Andes, Osisko Mining, Rainy
River Resources, Rubicon Minerals, Tournigan Energy, Ur-Energy and