Editorial Takeover binge looms for juniors

With the winding down of flow-through financing and stiffening taxes on capital gains, raising of risk capital in this country is bound to become more difficult. Hardest hit by these latest untimely and troublesome federal moves, of course, will be the junior mining sector which lacks production revenues for sustained exploration.

But the juniors’ predicament really began with last October’s market crash, which brought their sky-high share prices back to earth, i.e. to levels more attractive to any would-be suitors. Furthermore, that debacle all but wiped out equity financing on any worthwhile terms.

While it’s hardly a case of “game over” for this important — indeed essential — segment of the mining industry, it’s certainly going to be a new ball game with some new rules. Winners once again will be the big cash-rich companies which are already seeking out the most promising of the cash-poor juniors, leading up to corporate marriages, takeovers and/or buy-outs.

In fact this has already started, but as yet with nothing like the fervor and market excitement generated by speculation surrounding takeovers in the industrial sectors both here and in the U.S. For are we not witnessing a bidding war currently being waged between U.S gold miner giant Homestake Mining and Murray Pezim’s Pezgold Resources Corp. for control of B.C.’s North American Metals Corp.? And the buyout offer of the cash-rich Australian firm of Giant Resources for all shares of Pamour Inc.? And there are going to be more — a lot more.

Thanks to flow-through financing, there has been a heavy flow of readily available funds into junior mining ventures during the past year, creating unprecedented country-wide activity in gold exploration. While that kind of capital is not likely to dry up overnight, it certainly is not going to be forthcoming in the same massive gobs which have proved such a blessing, particularly in the north.

While there have been some excesses and abuses, by and large that money has been well spent. Sure, we would like to have seen another Hemlo or Carlin-type of discovery turned up. However it did result in quite a number of new gold mines coming on the scene which promise to boost this country’s production substantially. But we will have to go some to match the dramatic advance in gold output being enjoyed by our neighbor to the south which has already overtaken us, albeit with a big assist from Canadian miners and Canadian mining know-how.

Regardless of Ottawa’s hurdles, one way or another the expansion of the gold mining industry in this country will continue just as long as it proves profitable. And it certainly is that today. And will likely be for tomorrow and tomorrow.

Too, there has been a gratifying upturn in base metal prices which should spur the search for new mines in that almost by-passed sector. Here again, the juniors have an important role to play — given the funds.