Despite the growing need for increased critical minerals production, junior mining companies are struggling to receive the necessary funding to support new and ongoing projects.
“We’re in a supply and demand situation where everybody is saying they want more supply and there’s not a lot of financing alternatives available.” Richard Pearce, president and CEO of junior miner South Star Battery Metals Corp. (TSXV:STS) told S&P Global Commodity Insights at the 121 Mining Investment conference in New York.
A junior mining company is one that generates under US$50M in annual revenue, according to Commodity Insights classification, and they would like to see more.
“Bankers haven’t wrapped their brains around battery metals aside from lithium,” said Pearce. The energy transition narrative “would have you believe that there is only lithium in a lithium-ion battery.”
Battery metals include a variety of commodities including copper, cobalt, graphite, nickel, manganese, and vanadium. Limited understanding can result in low valuations, often meaning early-stage projects are overlooked by large investment funds, according to US Critical Metals Corp. (TSXV:USCM) CEO, Darren Collins.
“You have a very limited spectrum of [projects] which would be of sufficient market capitalization for these companies to participate as large institutional managers.” Collins said.
Investors can be unwilling to wait for returns from small companies with long lead times before they can be made profitable, according to industry participants.
Michael Williams, executive chairman of Aftermath Silver Ltd. (TSXV: AAG), called mining ‘a tough industry’ adding that, “when you do make these discoveries and bring them forward, it’s a very rewarding industry for everyone.”
A slowing global economy is also tightening the available capital for junior explorers and miners.
“That’s really the big impact for the smaller companies…There’s just not as much money available to fund our ongoing needs,” said Stuart Harshaw, president and CEO of Nickel Creek Platinum Corp. (TSX: NCP).
“You’re going to start to see projects stalled, if we have a significant deterioration in global capital markets as a result of inflation, interest rates increasing and overall general debt issues.” US Critical Metals’ Collins said.
This could lead to shortages for materials crucial to the energy transition, pushing prices up further, thereby motivating more exploration.
“The longer explorers aren’t able to do any exploration, the less product that’s going to be available, and therefore, the higher the price will go.” said Harshaw.
