Seeking Alpha

parlorfix's  Instablog

parlorfix
Send Message
Alessandra Rose Miguel is a business journalist covering technology, finance and real estate.
View parlorfix's Instablogs on:
  • Junior Miners: From Near-Bankruptcy To Discovery

    Everyone from the metals and mining sector knows how tough it is to be a junior miner in the industry. This has become even more apparent during a recent trade show geared toward junior miners in Canada. According to a report on The Financial Post in late September, junior miners are so strapped for cash that most of them declined to occupy a slot at this year's annual Cambridge House International conference in Toronto.

    Peter Koven, the writer of the piece, lamented this fact, considering that the conference was intended for junior miners and is one of the year's biggest events in the sector. "The junior mining sector is in such brutal shape right now that most companies are unwilling to even pay for booths at conferences that are geared to them," Koven said of the dismal trend.

    Unlike their producing counterparts, money is hard to come by for most junior miners-startups and small companies engaged in exploration or mining pre-production-as capital inflow is only certain unless they have transitioned into production. But it takes ages for these junior miners to switch to production as converting their licenses is an arduous, multi-step process.

    Complicating their predicament further are difficulties in securing funds to move their project forward, and investors' shaken confidence in small mining stocks. "Investor appetite for small mining stocks has simply evaporated over the last several years after they lost billions of dollars on these companies. Other sectors of the market have performed much better and drawn their attention elsewhere," Koven noted in his article.

    Citing Bloomberg, Money Morning reported that many junior miners quickly use up their limited funds and that Bloomberg News estimates showed these miners only possess 5.7 months worth of cash on their balance sheets that translated to a 25 percent decline from last year. If they don't find a way to plug the gaping hole in their budget, they could lose their ability to further their endeavors and eventually, close shop.

    The short-term solution, of course, is to cut down on costs. David Poynton, president of Daycon Minerals, believes that junior miners should re-plan their budget and seek other financing services such as royalties or stream financing. He also advised miners to ask around for their options. "If financings are dead, what other alternatives are there? Seek royalties or streams. Speak to your neighbours. If you have done this once, ask again," he was quoted as saying in The Northern Miner.

    Exploring M&A Options

    What are their other options then? For one, they can become the subject of a takeover bid from larger mines. Poynton also recommends going this route. "Many companies at this stage are surviving by merging with cashed-up companies. Such deals can be expensive, but do achieve the goal of survival. Time to look around - time to find that big company corporate saviour with an investment in juniors program," he said.

    Grant Thornton Canada and United Kingdom reported that a third of executives who participated in their recent poll said they are looking at acquiring smaller firms or divisions before the year comes to a close. A third of executives from the other side of the fence also expects the same and is expecting a takeover, partial sale or recapitalization.

    The sector is indeed ripe for consolidation for UK Grant Thornton's mining leader Chris Smith. "We've started to see elements of this emerge already, for example Glencore's approach for Rio Tinto and BHP Billiton's announcement that it will spin off assets," he said in an interview with Mining News.

    "Executives at mining companies are telling us that they are in the market to make acquisitions and a near-equal proportion say they will sell their mining company, or parts of it, this year. So there is plenty of opportunity for doing deals, especially for those looking to seize opportunities with distressed sellers ahead of any improvement in the commodities market," he added.

    According to Mining News, 32 percent of the 250 senior mining executives who participated in the Grant Thornton in the United Kingdom survey said their company is "likely to acquire a unit or firm." 27 percent, meanwhile, said they see a takeover bid coming soon or are likely "undergo a partial sale."

    Junior miners were also surveyed by the accounting firm. The same Mining News report noted that 36 junior miners they plan to make an acquisition this year. 36 percent also said they "expected to be sold or partially sold."

    Some players from the sector stand out: Amur Minerals Corporation (AIM: AMC), a LSE-listed exploration company with an ongoing exploration project in the Russian Far East, is a prime example of a junior miner that's ripe for a takeover bid. The company is currently focused on its Kun-Manie project in Russia which could begin production in the space of a year, granted that it receives final approval from Prime Minister Dmitry Medvedev for its application to convert its exploration license to a mining license for the project.

    Another company that's worth major miners' attention is Guyana Goldfields Inc. (TSX: GUY), which has recently obtained financing for its Aurora Gold Project located in the Cuyuni-Mazaruni region of South American country Guyana. The gold project is slated to start commercial production in mid-2015 and has been reported to possess a total gold resource of 6.54 million ounces in the measured and indicated categories and an additional 1.82 million ounces in the inferred category.

    Seeking Alternative Financing

    Miners can also turn to some form of financing to traditionally fund their operations. The most commonly used financing schemes among junior miners are equity and debt financing. Equity financing involves selling equity at a "very low price-to-net asset value ratio, which decreases shareholder value, while debt financing involves bank loans.

    Sandstorm Gold CEO Nolan Watson told Money Morning that debt financing is kind of problematic for miners as banks "typically" are not willing to lend money "against cash flows" for periods over five years. As most people would know, that's less than the time frame mines shift from exploration to production.

    "The normal delays in getting a mine built and into production often bump up against the limits of a banker's patience with keeping such a risky loan on his books," Watson was quoted as saying by Money Morning.

    Another financing scheme that's popular among mines is stream financing. Stream financing, according to a separate report from Reuters, is a financing scheme wherein miners get their loans upfront in exchange for selling a fixed portion of their production at a lower price. Soon the financing scheme evolved into a new way for companies to deliver their takeover proposition. Canadian miner Yamana Gold Inc. (YRI.TO) is one company that provided this type of financing to Osisko Mining Corp (OSK.TO). Eventually, white-knight investor Yamana offered Osisko a takeover bid for a 50 percent stake in the latter in April.

    According to Reuters, the financing technique is increasingly growing in popularity in the mining sector as a means to pay for M&A deals. Experts see it as a way to boost the frequency of mergers and acquisitions in the metals and mining sector which declined across the globe by 30 percent from 2011 and 2013 to just 703 agreements.

    "Inevitably, as streaming gains prominence across the sector, it is increasingly being considered as a form of acquisition finance, and will continue to do so," Lee Downham, lead partner for Global Mining & Metals Transaction Advisory Services, was quoted as saying in the Reuters report.

    Working Independently

    In Canada, a couple of "junior-backed" diamond mining companies have expanded operations thanks to explorations done by junior miners, according to a Yahoo! Finance report on Wednesday. These companies include AIM-quoted Firestone Diamonds PLC, which is planning to expand its Liqhobong mine in Lesotho, South Africa and Russian-based Alrosa also plans to open a couple of new mines.

    A junior miner also got a boost at the same time. Stornoway Diamond Corp. (T.SWY), a small cap that's engaged in constructing Quebec's first diamond mine, raised C$950 million in financing in April.

    Diamond mining is picking up steam recently after two decades that were devoid of discovery, industry analysts say; thus, the mining industry would need to keep up with renewed demand in the precious stone. A major player in this segment, Rio Tinto PLC (LSE: RIO), has just recently announced that it will spending $350 million to expand its Canadian, underscoring the opportunities lying dormant in the sector for smaller players with new mines.

    Dundee Capital Markets analyst Matthew O'Keefe said the move could boost backing for junior miners and could help start M&As in the sector, especially among mid-caps. But Mountain Province Diamonds Inc and Kennady Diamonds Inc (CDNX: KDI.V) chief executive Patrick Evans would rather stay away from these consolidation activities.

    "The juniors make the discoveries and the majors then try to swoop in. They caught us unawares last time round," he told Yahoo! Finance. "That won't happen again. We have the knowledge, we have the skills and importantly, we have the financial resources to be able to build Kennady Diamond as an independent diamond mine."

    Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.

    Dec 09 7:53 PM | Link | 1 Comment
  • Amur Minerals To Hold Annual General Meeting For Shareholders

    Minerals exploration and development company Amur Minerals Corporation (AIM: AMC) had announced it will be holding its annual general meeting today, a report from StockMarketWire.com said.

    The report revealed the LSE-listed company will hold the AGM at the Regus Business Centre, 2825 E. Cottonwood Parkway, Suite 500, Salt Lake City Utah on 24 November at 9 a.m. (Mountain Standard Time). No other details about the AGM are available as of this posting.

    Amur Minerals stocks rose sharply last week, jumping more than 10 percent to 6.60p at the end of Friday's trading session. According to Alliance News, Amur Minerals stocks were up 20.4% on Thursday, representing a 100 percent rise within three months.

    Alliance News also noted that the company's stocks have been on an upswing since September 2 after Amur has published updates on the progress of its application for a mining license for its Kun-Manie project in the Russian Far East. The company has been recently focused on converting its exploration license into a production license.

    Earlier this month, a news release from the company revealed that Russia's Federal Agency for Subsoil Use or Rosnedra has recommended Amur's application for further consideration and approval to the Ministry of Natural Resources (NYSE:MNR). MNR is tasked to review the license grant application prior to the office of Prime Minister Dmitry Medvedev.

    Amur Minerals Chief Executive Robin Young expressed his appreciation of Russian authorities' support of the project in a news release Thursday: "We are very pleased to be able to inform our shareholders that the mining license conversion process continues to move forward with the support of the Russian authorities and in particular Rosnedra."

    "We also note that our counterparts in the various Russian agencies continue to demonstrate that they are highly motivated, professional and interested in the successful development of Kun-Manie. This is discernible in the fact that Rosnedra completed the last round of work in a week."

    "Both Amur and the Russian Federation's local and national interests are aligned wherein all recognize that the successful granting of the production rights and subsequent development of the project will add greatly to the socioeconomic development of the important Far East region."

    In its project brief, the company said that it acquired its 95,000-hectare Kun-Manie exploration license in 2004. Amur Minerals owns 100 percent of the Kun-Manie project which is located in Russian federal subject Amur Oblast, some 700 km northeast of Blagovenshchensk.

    The company added that the site "was selected based on historical Soviet data which indicated the potential presence of sulphide nickel and copper." It explained that Kun-Manie possesses a massif that was replete with "economic amounts of sulphide nickel, copper, cobalt, platinum and palladium."

    The company said license-wide exploration has determined "the presence of a 40 kilometre long by 2 kilometre wide structure called the Kurumkon Trend" at the site that features primary deposits of sulphide nickel and copper.

    Amur Minerals said shareholders can access resolution details that are up for discussion for the meeting through its official website, http://www.amurminerals.com/.

    Nov 24 8:40 AM | Link | Comment!
  • Social Media Stocks To Add To Your Portfolio

    A lot of tech investors jumped for joy earlier this year after several reports revealed that an IPO is on the horizon for Pinterest, not to mention that the social media stock would be valued at nearly $4 billion. Unfortunately, Pinterest won't be going public anytime soon, so it seems, but don't despair as there are other stocks in the social media niche-other than Facebook and Twitter-that could offer equally lucrative earnings for investors. Found below are some of these stocks:

    LinkedIn (NYSE: LNKD)

    LinkedIn has changed the way companies find recruits and how job seekers find their jobs. Known as the Facebook for professionals, LinkedIn has grown to become a multi-million dollar business valued at $28.89 billion. Deep Nishar, Senior Vice President for Products and User Experience at LinkedIn, revealed in January this year that LinkedIn has over 200 million users from 200 countries and territories. (One report from CNN Money also revealed that the website is adding one new user every second.) According to Zacks.com, LinkedIn beat its earnings estimates two weeks ago, after the firm recorded earnings of 10 cents per share from $568 million in sales. Zacks.com's EPS and sales estimates were -5 cents and $562 million. Zacks.com attributed LinkedIn's revenue growth to the latter's acquisition of Bizo, a B2B marketing platform. LinkedIn's stocks closed at $231.00 on Tuesday.

    Yelp (NYSE: YELP)

    According to a Forbes.com report in September, Yelp has rapidly expanded into a number of international markets which include France, the United Kingdom and Germany. No matter what its detractors say, Yelp is undeniably an authority when it comes to crowdsourced reviews of local eats and destinations, and it has managed to cement its status as a leading search business in such a short amount of time. Additionally, Yelp provides tremendous value to investors, businesses and advertisers, and it doesn't have competition. Yelp's stocks closed at $62.31 on Tuesday, up by 5.49 from the previous trading day. Yelp is valued at $4.33 billion.

    AudioBoom (AIM: BOOM)

    AudioBoom is a digital social media audio platform that is centered on spoken word. The company, which started out in 2009 with backing from UBC and Channel 4, catered more to consumers and users then but has since changed its business model to focus mainly on partnering up with broadcasting companies. According to a report on The Sunday Times, the company's shares have climbed sharply by some 800 percent in the past five months since it went public through a reverse merger with One Delta. The stock debuted at 1.5p then, and closed Tuesday at 13.28p, up by 2.15 percent from its previous close. While it trades on the London Stock Exchange, American investors can gain access to the stock through stock brokers such as Charles Schwab or Etrade.

    Social media stocks are no doubt a great play for your growing portfolio. Despite their volatility, social media stocks offer investors value for the long-term. After all, high risk equals high return.

    Nov 12 2:37 PM | Link | Comment!
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.