Canadian Exploration Companies See Dwindling Investment Despite Optimism for Green-Energy Metals

Data from the Prospectors and Developers Association of Canada (PDAC) has revealed that preproduction companies in Canada are seeing a drop in major investment despite the nation’s demand for green-transition metals. The data shows that while funding for such companies has all but disappeared, battery metals as well as uranium have experienced a surge in funding compared to gold.

Last year represented the first time in a decade that the TSX Venture Exchange, where plenty of junior mining exploration companies are listed, didn’t see financing worth more than C$125 million. PDAC policy and program director Jeff Killeen says the exchange frequently saw C$200 million deals, but such junior minors are finding it exceedingly difficult to secure such funding.

Killeen noted that junior exploratory miners that were outside the critical mineral space faced even more challenges when trying to access capital. The companies that did secure financing would only land small deals, Killeen said, pointing to a decline of large-scale funding on the TSX Venture in recent years.

Total financing at the exchange has dropped for three years consecutively, and TSX Venture has fallen far behind the main board on equity raised for the first time in more than five years. Although the gap between the two expanded to C$1.1 billion last year and overall risk capital suffered, junior miners still accounted for three-quarters of all the funding raised on TSX Venture in 2023.

All Canadian exchanges cumulatively raised close to C$8 billion in mining equity last year, a slight increase from 2022 and in line with the country’s 10-year fundraising average. According to Killeen, capital availability hasn’t improved materially or moved in any way over the past decade. Killeen noted that while the availability of capital hasn’t declined either in the last 10 years, it “seems to be moving in different directions.”

Precious metals exploration still attracts the bulk of funding, but data from PDAC shows that other metals are steadily gaining ground on precious metals, including gold and silver. The total capital for battery and base metals as well as uranium has increased by nearly three times from 2020 to reach C$2 billion, the data shows, while capital for precious metal allocation reduced by 19% in 2023 alone.

Canada’s federal government recently issued policies and incentives to support mineral companies in everything from exploration efforts to mining project constructions. The incentives are part of the government’s Critical Minerals Strategy, a C$3.8 billion plan introduced in late 2022.

For established precious metals companies such as Royal Gold Inc. (NASDAQ: RGLD), things can only keep going up as gold is firmly set on an upward trajectory, at least in the near- to medium-term, due to ongoing geopolitical and economic factors.

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