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Key Performance Indicators for the Junior Resource Sector: Q2 2014 Update Prepared by Mike Doggett August 27, 2014.

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Presentation on theme: "Key Performance Indicators for the Junior Resource Sector: Q2 2014 Update Prepared by Mike Doggett August 27, 2014."— Presentation transcript:

1 Key Performance Indicators for the Junior Resource Sector: Q2 2014 Update Prepared by Mike Doggett August 27, 2014

2 Key Performance Indicators Key Performance Indicators for the Junior Resource Sector fall into four broad categories: –The amount of money spent on exploration and the general level of activity in specific exploration undertakings such as drilling; –The amount of capital raised to support ongoing exploration and administrative activities; –The financial status of junior companies with respect to working capital and cash balances; –The status of mining issuers on stock exchanges with a focus on the TSXV which is home to more than 1200 companies operating in the junior exploration and mining sector. KPIs for Q2 2104 are presented and discussed in the context of historical annual trends. Measuring the Health of the Junior Resource Sector

3 Historical Global Exploration Expenditure Trends Source: SNL Metals and Mining

4 Historical Canadian Exploration Expenditure Trends

5 Exploration Expenditures and Activities Actual exploration expenditures are not available except on an annual basis. SNL Metals and Mining measures exploration expenditure budgets on an annual basis through a survey of exploration and mining companies. Numbers released for 2013 indicate a 29% year-over-year decrease in non-ferrous exploration expenditures worldwide. Total expenditures were anticipated to drop from an all-time high of $21.5 billion in 2013 to $15.2 billion in 2013. Junior company expenditures dropped by 39% year over year to represent only 34% of overall expenditures – down from 55% at its peak in 2007. Major company budgeted expenditures decreased by 24% during the year. Budgeted expenditures for Canada tumbled by more than 40% on a year-over-year basis although (along with Australia) it still maintained its position as the country with the highest level of budgeted expenditures in 2013. NRCan surveys capture breakdown of expenditures in the categories of exploration and deposit appraisal. The exploration portion of this expenditure is shown to have decreased by more than 40% from its 2011 high. Projections for 2014 suggest that expenditure levels will stabilize. Summary of Changes

6 TSXV Junior Company Financings Source: Gamah International Number of Financings1998199920002001200220032004200520062007200820092010201120122013Q2 2014 Debt Financing3245526843251728508910868646612916553 Flow-thru758015130438135046833038960738126528336331220362 Equity (non-FT)90086210148701287133913019851405219882583199210321017947499 Total Financings100798712171242171117141786134318442894131411641339146114581315634

7 TSXV Junior Company Financings Source: Gamah International Proposed Financings(mil$)1998199920002001200220032004200520062007200820092010201120122013Q2 2014 Debt Financing (mil$)1397211691139793846532,7444,2361,3571,5313,9198361,5243,664607 Flow-Thru Financing (mil$)5072771391662684184006911,01654949165383161828765 Equity (non-FT) Financing (mil$)6955376434818972,1083,1153,6008,22013,6332,7074,7758,1566,8376,0012,349745 Total (mil$)8846818367111,2022,4553,9174,65311,65518,8854,6136,79712,7288,5048,1436,3001,417

8 Junior Company Financings The number of announced financings in the first half of 2014 has fallen slightly on an annualized basis as compared with 2013. The value of financings has decreased significantly and on an annualized basis would represent only 45% of 2013 levels. The percentage of smaller financings has decreased marginally on an annualized basis. For example by the end of Q2 2014, 7% of financings were for $100,000 or less. This compares with 12% in 2013 but only 0.5% in 2010. Similarly, we see that approximately 48% of all financings in the first half of 2014 were for raises at or below $500,000. In 2013 this number was 52% but in 2010 only13%. Financings priced at or below $0.10 per share accounted for approximately 56% of the total in Q1 2014 –higher than the 50% from 2013 and much higher than 13% in 2010. The percentage of announced financings attributed to debt decreased slightly during the first half of 2014. About 8% of announced financings accounting for 22% of the value of all financings were classified as debt. Summary of Changes

9 Working Capital Balances of TSXV Companies

10 Working Capital Balances Working capital balances for TSXV companies as highlighted in the Kaiser Report indicate that 58% of juniors have a working capital balance below $200,000 as of 6 August 2014. A strong correlation is shown between share price and working capital balances. For companies trading below 10 cents per share, the average and median working capital balances were negative at -$0.9 million and -$0.1 million, respectively. Collectively, those companies with negative working capital balances are carrying a total of $1.9 billion in debt. Summary Update

11 TSXV Market Activity Source: TMX Group TSXV2003200820092010201120122013Q2 2014 Number of Issuers974 1,071 1,103 1,178 1,275 1,309 1,2841,247 New Listings IPO 39 14 36 42 41 9 QT 38 47 78 49 39 33 RTO - 8 10 18 8 10 Other 19 17 25 43 21 12 Total 96 86 149 152 109 649 Equity Capital Raised (C$M) 3,036 2,798 5,269 5,893 2,787 1,283 911 Number of Financings 1,382 1,567 2,110 1,803 1,450 1,207 644 Average Capital Raised (C$M) 2.20 1.79 2.50 3.27 1.92 1.06 1.41 Volume Traded (million)7,477 27,378 31,200 46,041 40,597 24,971 20,653 12,012 Value Traded (C$M)3.637 13,227 10,651 22,431 25,756 10,450 4,630 2,266 # of Trades (million)1.204 3.65 3.66 6.55 9.05 4.67 2.61 1.35

12 Market Activity The number of issuers has continued to decline from the peak in 2012 although the total decrease is only about 5%. The decrease in the first 2 quarters of 2014 was 37 since in the end of 2013. This number reflects a mix of new listings (24), suspended companies (19), acquired or merged companies (13), companies moving to other exchanges (23), and a host of name changes and restructurings. The number of new listings at 24 in the first half of 2014 is at the lowest level in several years. Approximately half of the new listings are related to companies dropping down from the TSX. On an annualized basis, increases are evident in equity capital raised, average size of capital raises, number of trades and volume of trades compared with 2013. Summary of Changes

13 Market Capitalization – TSXV Mining Issuers Market Capitalization 20032004200520062007200820092010201120122013Q2 2014 Total Market Cap ($million)105121230017680348103449588042044040117283571925110802 13,028 Average Market Cap ($ million)10.79 13.77 17.33 35.59 33.43 8.17 18.14 34.08 22.25 14.718.41 10.45 Share of Market Cap Bottom 25% of Issuers2% 1% Bottom 50% of Issuers7% 9%8%7% 5% Top 25% of Issuers78% 80%78%77%81%78%79%81%84%85% 84% Top 10% of Issuers56%57%61%58% 64%59%58%61%64%65% 66%

14 Market Capitalization As of Q2 2014, both total and average market capitalization of mining issuers listed on the on the TSXV showed significant gains over 2013 year end values The total market capitalization increased from $10.8 billion to $13.0 billion while the average market capitalization of a listed company jumped from $8.4 million to $10.5 million. The largest 10% of issuers continue to account for approximately two thirds of the overall market capitalization of all issuers. Summary of Changes

15 Outstanding Shares – TSXV Mining Issuers Shares Outstanding 20032004200520062007200820092010201120122013Q2 2014 Total Shares (million)20,100 26,9703185542096 55,618 59,206 65,372 78,404 93,824 95,32791,572 89,618 Average Shares (million)20.6 30.2 31.2 43.0 53.9 55.3 59.3 66.4 73.6 72.871.3 71.9 Issuers above 25 million shares26%40%47%35%75% 74%76%81%78%74% 73% Issuers above 50 million shares6%11%14%26%39%41%42%47%53%51%49% 48% Issuers above 75 million shares2%4%6%11%19%22%24%31%34%32% 33% Issuers above 100 million shares1%2%3%6%9%11%14%18%22%

16 Outstanding Shares As of Q2 2014, the total number of outstanding shares declined reflecting the net difference from newly issued shares, fewer listings and shares that were consolidated during the period. The average number of shares outstanding increased slightly due to the drop in number of issuers as compared with 2013. The distribution of shares has remained relatively constant as reflected by the number of issuers with outstanding shares above threshold levels of 25, 50, and 100 million shares. Of the companies that were listed on the TSXV as of end of Q2 2013 and continued to be listed on the TSXV as of end Q2 2014, 42% had effectively no change in their share base, 46% issued new shares, and 12% had share consolidations. Summary of Changes

17 Share Prices – TSXV Mining Issuers Share Price Distribution2003200420052006200720082009201020112012 2013Q1 2014 Average Price $ 0.52 $ 0.45 $ 0.55 $ 0.82 $ 0.63 $ 0.14 $ 0.30 $ 0.53 $ 0.31 $ 0.21 $ 0.12 $ 0.145 Issuers with Price ≤ $0.057% 2%3%47%15%5%19%38%54% 47% Issuers with Price ≤ $0.1018%20% 7%13%71%37%19%40%60%74% 68% Issuers with Price ≤ $0.2040%44%43%28%35%84%63%42%66%79%88% 84% Issuers with Price ≥ $0.5027%24%26%41%31%5%14%26%14%8%4% 5%

18 Share Price As of Q2 2014, the price of shares on the TSXV rebounded somewhat from the year-end 2013 values with the average price climbing from continued to $0.12 to $0.145. The number of companies trading at or below $0.05 per share also decreased – dropping from 54% to 47%. 68% of companies were trading at or below $0.10 per share – also better than the year-end 2013 value. As of Q2 2014, only 5% of companies had a share price exceeding $0.50 per share. This percentage reversed the steadily decreasing trend evidenced by a drop from a high of 26% in 2010, to 14% in 2011 and 4% in 2013. Of the 1083 issuers in common from end Q2 2013 to end Q2 2014, 43% ended with lower share prices including 38 of the 130 companies that carried out share consolidations during this time. Summary of Changes

19 Summary The significant drop in exploration activity evidenced by the SNL Metals and Mining budgeted exploration expenditures for 2013 were overall 29% and in Canada 40%. While no numbers are available for Q2 2014, the level of exploration activity shows no signs of rebounding to the high levels seen in the previous three years. Working capital balances continued to be a significant factor for junior companies with TSXV companies having negative working capital balances totalling $1.9 billion in early August 2014. The number of announced financings for juniors has decreased slightly while the value of announced financings has decreased significantly compared with 2013 levels. The number of listed companies on the TSXV has declined by only 5% from its high in 2012. This is despite declining cash positions, working capital and financing opportunities; Outstanding shares of junior companies have stabilized somewhat as new shares issued were balanced by consolidation in other companies; As of Q2 2014:

20 Summary Share prices showed a slight rebound - increasing from an average of $0.12 at the end of 2013 to $0.145 per share at the end of Q2 2014. The number of issuers trading at or below $0.05 per share decreased from 54% to 47%; Market capitalization has increased along with share prices and although only about one third of its 2010 peak a 21% improvement from 2013 is shown; Trends in market statistics of companies on the TSX are similar to those exhibited on the TSXV but the rebound in 2014 has been stronger than for TSXV companies. Market capitalization, share price and shares outstanding all increased during the first half of the year. The number of issuers decreased slightly as some companies moved to other exchanges including the TSX-V. Juniors are proving to be more resilient than predicted as few have yet to go out of business completely. Barring an improvement in the markets during the remainder of 2014, however, expect to see a significant increase in corporate restructuring as juniors are forced to seek creative solutions to stay in business. As of Q2 2014:

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