Cash King for Junior Miners As Well

The cliched expression that cash is king is rearing its head again as fears of a global recession mount. And the credit crunch is only magnifying the need for some money in the bank.

The junior mining sector’s downtrend has more recently included a decline in exploration activity. And this reflects both the lack of appreciation by the market for exploration and development results, and “severely constrained” access to new capital, according to the team of mining analysts at Canaccord Adams.

“We believe companies have realized that deploying capital into a project at this time may not provide an acceptable market return,” they said in the firm’s Junior Mining Weekly.

After noting the importance of cash on the balance sheets of junior miners for several months, Canaccord said it appears that the trend toward preserving cash is firmly in place.

Several miners have announced their intentions to preserve cash recently and here are a few examples this month:

Zincore Metals Inc. (ZCRMF.PK) CEO Timo Jauristo, Oct. 1, 2008 said:

We recognize the need to preserve cash so we are using this time to carry out mapping and sampling programs that are low cost... We are committed to preserving the assets in the Company through this credit crisis and collapse in valuations so our shareholders can benefit when the market turns... We will reduce expenditures as required and with over $2.2 million in cash at the end of August we are well positioned to withstand the market uncertainty.

Crosshair Exploration & Mining Corp. (CXZ), Oct. 6, 2008 wrote:

Due to the climate of uncertainty created by the current state of the financial markets, the Company has elected not to proceed with a winter drill program. A comprehensive cash conservation program is being implemented throughout the Company, which includes the suspension of the Company's field operations.

Coro Mining Corp. (CROJF.PK), Oct. 2, 2008 wrote:

Coro has elected not to proceed with its acquisition of the Cerro Negro mine in Chile, at this time. This decision was based on the following points. The shareholder approval necessary to complete the financing of the Cerro Negro transaction was in place, however: Since the original acquisition terms were negotiated in February 2008 market conditions have changed dramatically. Current conditions in the credit markets make refinancing of the Partnership "bridge" debt facility uncertain both on a twelve month and twenty-four month horizon. Near term weakness in the copper price due to slowing economies worldwide will negatively impact economics at Cerro Negro.