Credit crunch hitting junior miners, E&Y says
Tight credit markets have hit the junior mining companies that do most of the exploring for new mineral reserves, consultants Ernst & Young said.
There have been roughly the same number of initial public offerings in Canada among mining companies this year as last, but the dollars raised are "significantly lower," the consulting firm said in a news release.
"That means the credit crunch is hitting the mining sector's exploration-stage companies," said Tom Whelan, an Ernst & Young partner and mining specialist.
Mining IPOs accounted for more than 80 per cent of Canadian firms going public this year, the company said.
While less money has been raised, there is still a demand for junior companies because senior mining companies need new sources of supply and aren't doing the exploring themselves.
That suggests more takeovers are coming, as senior companies buy juniors that have a found reserves.
"We're anticipating many more mining mergers and acquisitions in the second half of this year," Whelan said.
A recent E&Y international survey found that 90 per cent of mining companies expect to do a deal in the next two years.
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