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The S&P/TSX Venture composite index rose in early trading on Wednesday, even as its larger-cap cousins struggled, putting the small-cap Canadian index on track for its 11th consecutive gain.

That's an impressive rally, but joining it requires nerves of steel and a sunny view on commodities: Over the past three years, the Venture index has been struggling to pull out of a demoralizing bear market – and without a pickup in mining activity, the bad times will continue.

Since early 2011, the index has slumped more than 60 per cent, taking it close to its low point of 2008 during the financial crisis. The index has a high exposure to junior mining companies, which makes it exceptionally vulnerable to any downturn in mining activity.

And there has been a downturn: Gold, in particular, has fallen 36 per cent from its record high in 2011. Just as bad, companies are finding it difficult to raise money to finance their operations.

Last year, some observers noted that junior mining companies were running short on cash, raising the risks of a massive number of failures. According to PricewaterhouseCoopers, cash and short-term investments for the top 100 junior miners fell by an astounding $695-million in 2013 (as of June 30) over 2012, revenues fell by 25 per cent and writedowns surged 175 per cent to $87-million.

"It's been a tough couple of years for the junior mining sector," PwC said in its report. "A drop in metal and mineral prices, alongside tight financing markets, has caused junior mining valuations to plummet and remain at rock bottom levels. That's made it extremely challenging for juniors to raise money – an activity that can be crucial to their existence."

Now, investors are betting that the worst is over. Among the top five movers in the S&P/TSX Venture index over the past 11 trading days, four of them are exploration companies.

Keep in mind, though, that there have been false starts before. During the downturn that began in 2011, there have been six rallies ranging between 10 per cent and 25 per cent, and each one has faded into a new downturn. The current rally has taken the index up less than 8 per cent, suggesting that – 11-day winning streak aside – it could be in its early stages. But with gold prices still struggling, it's not a bet worth taking.

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