The junior mining segment has had a rough couple of years, experiencing two years straight of lackluster returns and a losing streak that rivals the segment’s historic gold bear market in from 2011 to 2015. This year has been just as difficult for junior miners as most players in the sector have seen another year of poor performance amid record underinvestment.
Investment in the mining sector has been declining for the past decade, and the junior mining sector has felt it the most. Smaller companies typically have less access to capital and have few funding options once traditional capital runs out. Furthermore, massive investment in the green-energy transition has reduced the incentive for investors to invest in the next generation of mineral commodities as future demand may not be enough to consume all the supply.
With conditions for junior mining companies deteriorating by the day, some pundits have compared the ongoing situation to the historic lows of 2016 when the mining industry hit a significant cyclical bottom. That year was characterized by limited capital in the junior mining sector and stocks trading at multiyear lows, factors that are also affecting the industry today.
However, junior mining companies can leverage ongoing market conditions to get ahead and avoid the pitfalls of 2016. For starters, commodity prices are higher today than they were in 2016. Copper is currently trading at $3.60 per pound compared to only $2 per pound in 2015. Nickel has also seen a major price bump, jumping from $8,400 per ton in 2016 to around $18,300 per ton in 2023.
Although market conditions have deteriorated, especially for junior companies in the mining sector, they can still get more value for their products compared to 2016.
Precious metal prices are also higher than their lowest levels in 2015. Gold is now trading at roughly $1,900 per ounce up from $1,020 while silver went up by 80% from $13 per ounce to $22 per ounce.
Factors such as economic stimulus to China’s struggling real estate market as well as deflation fears in the Asian nation may result in a repricing of junior mining stocks. This might also happen if the U.S. Federal Reserve announces an interest rate cut earlier than expected, putting increased pressure on the U.S. dollar and boosting dollar-backed commodities.
Attitudes to junior mining stocks may also change if China and Russia announce further disruptions to critical supply chains such as fertilizer, important metals, grains and energy.
Exploration companies such as Eloro Resources Ltd. (TSX: ELO) (OTCQX: ELRRF) can now take advantage of the current push for green energy to woo more investors and accelerate their mine-development projects.
NOTE TO INVESTORS: The latest news and updates relating to Eloro Resources Ltd. (TSX: ELO) (OTCQX: ELRRF) are available in the company’s newsroom at http://ibn.fm/ELRRF
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