As always, the gold exploration market comes with its unique set of opportunities. Previous 2020 predications had failed to take into account the unexpected global effect of COVID-19, with those involved in the industry, including junior miners, now gearing up for what is looking to be one of the hottest gold markets in years. Here’s why junior miners are excited about the gold exploration market in 2020:
Increase in Deals
Established mining companies are shifting away from initiating new large-scale mining projects due to the expensive and time-consuming nature of nascent projects, particularly with decreased rates of production. Instead, miners are turning to mergers and acquisitions to keep businesses sustained. As such, mergers and acquisitions are expected to take centre stage during 2020, which is ideal for junior miners who have attractive assets.
A Change of Investors
High net-worth investors and merchant banks have been showing a renewed interest in junior gold miners. Their involvement in the industry is expected to continue to grow throughout 2020 in conjunction with an increasingly attractive gold market. Additionally, miners are beginning to tap into increasingly sophisticated strategic investment strategies and financing opportunities.
Investment Flow to Juniors
While juniors experienced a drop of over 10% near the end of 2019, major producers have benefitted from a 24% equity increase. However, the juniors’ patience will be rewarded as investment is expected to flow towards the juniors in 2020. The nature of the industry typically indicates that returns on investment tend to trickle down in layers meaning juniors can get ready for a rebounding market that they can take advantage of.
Low Oil Price Benefits
Oil prices have been dropping significantly over the last few months. For almost everyone except for those in the oil industry, this is a promising situation for production. Gold mining is an energy intensive process that uses significant amounts of petroleum products to operate vehicles and heavy machinery. In 2020, oil prices are not expected to recover and can possibly be dropping even further. Gold miners can expect to benefit financially as the cost of operations drops along with the oil prices. Furthermore, as oil investments suffer, investors will seek opportunities with the historic stability and growth that gold investments have proven to offer.
The gold exploration market is experiencing unprecedented situations due to the large scale disruption across economies and industries that have been playing out around the world. Despite many changes in the industry, junior miners have a lot to look forward to in 2020.