March 4, 2015

#PDAC2015: Consider it mild validation of the venture #exploration model. Even with all their problems, Juniors do it better than seniors @Mineweb

Mining finance and investment

Juniors do it better than seniors

PDAC DISPATCH (2): Research suggests juniors hold their own in discovery.

As
PDAC unfolds here’s a nice little toast to junior explorers in an
analysis of exploration success by Richard Schodde, the principal at
MinEx Consulting: They beat seniors at finding deposits, both by bang
for buck and in the number of discoveries made.

“In the last
decade juniors did a 30% better job,” Schodde noted in a presentation
covering the state of the Canadian exploration industry.

He broke down data covering 2005-2014. Seniors spent $12.5 billion on exploration in Canada, while juniors spent $14.6 billion.

While
they put roughly the same amount of money into the ground, seniors only
made 21 discoveries while juniors made 66 over the past decade. As
Schodde calculates it the value discovered by juniors was $12.1 billion
versus $7.9 billion for seniors.

In terms of types of discoveries
the numbers, not surprisingly, were more evenly matched at the higher
end of the scale of deposit size. In the past decade seniors edged out
juniors in making discoveries of the larger Tier 1 and 2 deposits: 8.7
of them versus 7.3 for the juniors.

Still Schodde concluded, “It’s a surprising result”.

Consider
it mild validation of the venture exploration model. Despite junior
foibles – the so-called lifestyle companies where little money makes it
into the ground but a surprising amount of its makes it into G&A
among others items – they create more value through discovery than
seniors.

It’s somewhat surprising because seniors, clearly, have
access to greater resources, but don’t create more value for it. To be
fair seniors do, as noted, find more of the type of the deposits they
want – the big ones – while juniors, less discriminating, are open to
drilling deposits of much smaller size (sometimes ad nauseum and to little effect).

But
then, juniors nonetheless near match the seniors in this category and
ultimately create more value for their efforts. It all suggests that the
market is not that bad, after all, in allocating capital to juniors to
make discoveries.

They can hold their own against the big boys.





Juniors do it better than seniors - Mineweb

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