Junior miners, small mining companies still in the exploration or early production stages of mine development, are having an increasingly hard time raising sufficient funds to get their mines into production.
With companies quickly burning through their limited capital, Bloomberg News estimates that on average, junior mining companies have only 5.7 months worth of cash on their balance sheets, down 25% from last year. Unless smaller mining companies can raise more capital, they will be unable to fund ongoing exploration projects and will have to cease operations.
Mitchell Krebs, chief executive officer of Coeur d'Alene, told Bloomberg, "You will see a lot of companies hit the wall in 2013."
That makes them tempting targets for some of the bigger, well-financed mining companies such as Coeur d'Alene Mines Corp (NYSE: CDE).
If a junior miner sitting on a strong claim gets shut out of the capital markets, a well-funded buyer can acquire the company and its claim for a song.
"Everyone seems to be running away from it now and looking at selling off assets," Newmont Mining (NYSE: NEM) CEO Gary Goldberg said in a Bloomberg interview Feb. 25. "That's the time to look in the opposite direction from the herd to see what opportunities might be out there."