TSX juniors down nearly 50% from post-crisis peak

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There's been hope for junior miners of late. As the markets stabilize, the volatile S&P/TSX Venture Exchange, home to the country's emerging resource companies, continues to rebound. And as we recently pointed out, it's been junior gold miners that have benefited the most from the recent gold rally.

But expand the time frame and you'll see that things are still quite gloomy.

The TSX Venture – which includes firms from all sectors, not just miners – is off 46 per cent since the post-crisis high in February, 2011. It's down 23 per cent from its 2012 peak in February.

To compare, the TSX Composite Index is down 13 per cent from its post-crisis high and down only 1 per cent this year.

The situation has been particularly bleak for miners with market values typically less than $500-million. A new report from PwC notes that the aggregate market value of the TSX Venture's top 100 miners plummeted 43 per cent from July, 2011, to June of this year – though this sample period skews the numbers because the recent rally from August to October, when the index rose regain about 15 per cent, isn't included.

Still, shares in these companies are still struggling. Typically that would spur some deal making, but it's hard for chief executive officers to forget the valuations they saw just last year, sparking what PwC dubbed a "robust game of chicken." The question now is "who will blink first, buyers hungry for a good deal or sellers watching their cash deplete?"

Merger and acquisition activity would be extremely helpful for the investment dealers that depend on this sector to drive revenues because conventional equity offerings sure aren't cutting it. PwC noted that debt and equity financings for the 100 biggest miners on the TSX Venture plummeted 52 per cent during its sample period.

Aside from valuations, PwC also highlighted an interesting change in the composition of the TSX Venture's biggest miners. More and more explorers are becoming developers and producers. In 2009, the top 100 miners was made up 71 explorers and 29 producers. Today it's 58 explorers and 42 producers and developers. And the producers actually made money this year, posting an aggregate profit of $107-million, compared to a $261-million loss last year.