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Emerging Markets, Better Deposits Key to Juniors’ Success
Tuesday March 5, 2013, 4:30am PST

Conserving cash

The environment is certainly getting tougher for juniors looking to sell projects to major mining companies.

Consensus forecasts suggest that when they report for the past quarter, most of the big miners will reveal significant drops in profit — possibly the largest falls in a decade, according10 to the Financial Post.

The above-noted asset write-downs are also weighing on the majors. Rio Tinto, Vale (NYSE:VALE11) and Anglo American (LSE:AAL12) have all reported billion-dollar losses on mining projects recently. Glencore and BHP Billiton (ASX:BHP13,NYSE:BHP,LSE:BLT) may do likewise as part of their upcoming financials, analysts have stated.

This climate has left few majors talking about building more projects. Barrick’s new CEO, Jamie Sokalsky, has specifically said14 he does not want any new mines.

That means a few things for juniors. For one, they now have fewer chances of being taken over by a major company, even if they discover a significant deposit.

Also, juniors may see less cash from the majors for joint ventures and equity stakes. In the past, such arrangements have been common ways for big companies to get a toehold in promising projects.

But with the money taps now off at the big mining houses, juniors may be left to fund more of their projects on their own.

Smaller companies will also have to ponder their end game should they find themselves holding a large, but undeveloped mineral resource.