{"id":2298,"date":"2011-12-12T19:50:44","date_gmt":"2011-12-13T00:50:44","guid":{"rendered":"http:\/\/www.cusjc.ca\/ottawainsight\/?p=2298"},"modified":"2017-11-19T18:50:25","modified_gmt":"2017-11-19T23:50:25","slug":"a-tough-market-for-juniors","status":"publish","type":"post","link":"http:\/\/www.cusjc.ca\/ottawainsight\/?p=2298","title":{"rendered":"A tough market for juniors"},"content":{"rendered":"

As Everton Resources Inc. anticipates results from what is potentially the most valuable exploration projects in its history, the company may be alone in its celebration. <\/span><\/p>\n

\u201cThe mechanical problems that beset our initial drilling \u2014 which are typical of a new drilling program \u2014 have been resolved and we\u2019re moving forward now with confidence.\u201d<\/p>\n

After selling millions of shares in other exploration companies during its third quarter and hoping the concessions adjacent to one of the Dominican Republic\u2019s largest gold reservoirs would yield big results, the future looked bright for the Ottawa-based junior mining company. But market volatility has made investors reluctant to get involved in the highly volatile junior mining sector.<\/p>\n

During the third quarter ending July 31, Everton\u2019s exploration expenses increased 146 per cent from the same quarter a year earlier. For investors, more digging would improve the odds of Everton revealing the gold, silver and copper resources it set out to find.<\/p>\n

In a news release on Oct. 25, Chairman and CEO, Andre Audet, revealed the company had run into some snags along the way, but reassured shareholders that Everton\u2019s exploration strategies in the Dominican Republic remained on schedule.<\/p>\n

\u201cWe\u2019ve only achieved a small portion of our APV (Ampliacion Pueblo Viejo) South drilling objectives as deep-drilling geology and mechanical obstacles slowed our progress,\u201d Audet said in the release. \u201cWith only five holes reporting though, we\u2019re still some way from unlocking APV\u2019s potential.\u201d<\/p>\n

\u201cThe mechanical problems that beset our initial drilling \u2014 which are typical of a new drilling program \u2014 have been resolved and we\u2019re moving forward now with confidence,\u201d Audet added.<\/p>\n

He also tried to quench shareholder thirst by reiterating Everton was in good shape to build shareholder value after acquiring 100 per cent ownership of the APV, Ponton and La Cueva concessions from Brigus Gold Inc.<\/p>\n

Audet did not reply to an interview request.<\/p>\n

SLIDING SHARE PRICE<\/span><\/strong><\/p>\n

Formed in May 2004, Everton is a junior mining company that explores for gold, silver and copper in the Dominican Republic, Ontario and Quebec.<\/p>\n

Once an exploration-stage or junior mining company defines a resource, a bigger mining company will buy the company or its resources and bring discoveries from drilling into production. The resources it finds \u2014which, in turn, increases its share price \u2014 is the raison d\u2019\u00eatre for junior mining companies.<\/p>\n

\u201cPeople just aren\u2019t willing to invest in the junior mining sector, which is risky to start off with and initial public offerings are probably the riskiest because there\u2019s no public track record.\u201d<\/p>\n

In the last three months, Everton\u2019s share price has dipped dramatically. As of Nov. 17, the company\u2019s shares were valued at $0.15, which was down 48 per cent from a year before and floating around its 52-week low of $0.11. Everton\u2019s shares have decreased steadily since a 52-week high of $0.45 on Apr. 15 of this year.
\nNot only are the company\u2019s shares plummeting, but mining investors may begin looking to new sectors altogether \u2014 ones that are more stable.<\/p>\n

According to PricewaterhouseCoopers\u2019 \u201cJunior Mine 2011\u201d report, market uncertainty caused junior mining companies to hold off financing in the third quarter. The report \u2014 which reviews the top 100 mining companies listed on the TSX Venture Exchange \u2014 suggests trends such as slumping capital generation and few IPOs resemble the commodity price collapse in 2008.<\/p>\n

\u201cPeople just aren\u2019t willing to invest,\u201d says John Gravelle, PwC\u2019s Canadian mining leader, \u201cin the junior mining sector, which is risky to start off with, and initial public offerings are probably the riskiest because there\u2019s no public track record.\u201d<\/p>\n

The market volatility has occurred because of currency swings, the pace and lackd of reliability of earnings and caustic political environments. The sovereign debt and deficit issues around the globe also contributed to investors shying away from riskier ventures.<\/p>\n

\u201cWhen people start getting hesitant and don\u2019t know what the future will bring, they tend to back away from IPOs first, and then back away from the junior sector,\u201d added Gravelle.<\/p>\n

HARD TO FIND INVESTORS<\/span><\/strong><\/p>\n

Everton is not the only junior mining company struggling to find and maintain investors.<\/p>\n

On Nov. 17, the GDXJ index \u2014 a small-cap focused Market Vectors Junior Gold Miners exchange-traded fund that measures the performance of junior mining companies \u2014 saw its share price drop 20 per cent from a year ago. Everton\u2019s share price has mirrored this plunge.<\/p>\n

\u201cThe gold business five or six years ago was pretty tough because of the value at that point in time.\u201d<\/p>\n

But according to Gravelle, there is a silver lining for junior mining companies like Everton. He believes there will be more activity and optimism as junior markets begin to fluctuate because of mergers and acquisitions. His company\u2019s report states, \u201clarger mining companies are outsourcing their exploration activity, investing less of their money in exploration and more in acquiring companies who are currently engaged in exploration.\u201d<\/p>\n

Also working in Everton\u2019s favour is the price of gold, which closed at $1768.93 (CAD) an ounce on Nov. 17, up 29 per cent from the same date a year earlier. The commodity is performing better than ever and is the type of secure investment that make companies like Everton a potentially safer investment.<\/p>\n

\u201cThe gold business five or six years ago was pretty tough because of the value at that point in time,\u201d says Ross Gallinger, executive director of the Property and Developers\u2019 Association of Canada. He said the success of gold will drive exploration, and in a period of unpredictability when people don\u2019t know where to make secure investments, gold is considered a good hedge against other currencies.<\/p>\n

\u201cToday is completely different, much like a lot of the other commodities that are in this super cycle.\u201d<\/p>\n

Fortunately for Everton, there are resources beneath the ground for the finding. It holds a large land position adjacent to Barrick\u2019s (60%) and Goldcorp\u2019s (40%) APV gold deposit which holds an estimated 22.4 million ounces of gold, 455 million pounds of copper, and 131.3 million ounces of silver.<\/p>\n

GOVERNMENT PRESSURE<\/span><\/strong><\/p>\n

But while gold is thriving, there are other factors Everton must consider while exploring in the Dominican Republic. Governments are making it increasingly harder for foreign companies to search for minerals on their land.<\/p>\n

Unless the industry improves or the company starts yielding results, it could be a long upcoming winter for Everton.<\/p>\n

\u201cMore and more corporations and investors alike are shifting focus from under explored, high-risk high-reward countries towards areas of geopolitically stable and sound governments,\u201d says Simon Quick via email, who manages South American mining projects for US Gold Corp.<\/p>\n

Quick says some governments have expropriated, raised taxes and taken away permits for mining companies upon realizing there is potential for profit at a site.<\/p>\n

\u201cNo longer are the benefits of reduced labour costs and marginal regulation outweighing risk premiums priced into these regions.\u201d<\/p>\n

As it continues its deep drilling in the APV reservoir, the company hopes it strikes gold soon. Unless the industry improves or the company starts yielding results, it could be a long upcoming winter for Everton.<\/p>\n","protected":false},"excerpt":{"rendered":"

As Everton Resources Inc. anticipates results from what is potentially the most valuable exploration projects in its history, the company<\/p>\n","protected":false},"author":155,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7,1],"tags":[254],"class_list":["post-2298","post","type-post","status-publish","format-standard","hentry","category-corporate-profiles-2011","category-news","tag-alex-paterson"],"_links":{"self":[{"href":"http:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=\/wp\/v2\/posts\/2298","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=\/wp\/v2\/users\/155"}],"replies":[{"embeddable":true,"href":"http:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2298"}],"version-history":[{"count":10,"href":"http:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=\/wp\/v2\/posts\/2298\/revisions"}],"predecessor-version":[{"id":4400,"href":"http:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=\/wp\/v2\/posts\/2298\/revisions\/4400"}],"wp:attachment":[{"href":"http:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2298"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2298"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2298"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}