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Tuesday, October 25, 2011

Money Dries-Up for Juniors

The NYSE
Photo by Luigi Novi



Even in the best of times junior mining and metal companies have a hard time finding investors and as of October 2011 it’s becoming a hard-scrabble existence to find any at all.  These are times when the whole world is suffering from a king sized case of economic blahs, where it seems one calamity after another is leaping out of the woodwork to make investors nervous about where they put their money.  Darn little of it is available for investing in mining causing many miners to take some really creative ways of getting the investors to part with their money.

The trouble started last March when Japan was struck with a devastating tsunami.  It was then that investors started pinching their money giving junior miners a tough row to how for their money.  The market started to slow down then, and by October had ground to a dead halt. Junior miners are the first ones to take a hit in the slowed down economy where they have traditionally gotten their financing.

Cash money!
Photo by Revisorweb


According to one investor money has been flowing away from the juniors that wont change until the financial panic affecting the whole globe reduces slightly.  In the third quarter of this year the market had slowed down finally coming to a dead stop after the 1st and 2nd quarters where the cash flow was slowing down.

Mining Stock from Tombstone, Arizona in 1883


 The real problem is whether we are sliding back into a recession or not.  That is the $64 question.  One mining company investigating a gold/silver deposit in Africa has promised its investors more then just stock they’ve also promised each investor two ingots of silver each weighing ten pounds.  If you need to raise more money you are going to have lots of trouble.  Investors are more selective about who gets the money.  Many of the deals being cut now are for just enough money to limp along.  Many investors are just maintaining the status quo for the next three to six months.  It is expected that the future is going to bring with it some relatively expensive financing.  This doesn’t mean there is no money, but if you had to raise a few million dollars, you’ll have to work for it.

As it was put by one investor, “Lots of investors have cash but the mentality right now is: why should I buy this week, if next week I can get it much cheaper.”

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