A slight opening for junior miners seeking investment

Resource nationalism will be a key concern for the resource sector in 2023, according to Oreninc CEO Kai Hoffmann.

Hoffmann spoke to Kitco last week. Oreninc tracks deal flow in the junior resource sector.

In 2022 the Federal Reserve's tightening to tame inflation hurt the resource sector, with financings down markedly. Oreninc reported that the number of financings dropped 30%. Without investment, some companies were forced to slow work. But at the close of the year, Hoffmann saw the glimmers of a recovery.

Hoffmann is also host of Deutsche Goldmesse, a bi-annual junior resource show in Frankfurt.

Conversation was lightly edited.

KITCO: Juniors were mauled by this tightening phase. Can you quantify how badly hurt the resource sector was in the latter half of 2022?

HOFFMANN: It has been brutal for most of the year, but then came November and the tide has turned a little bit. The financing window has opened. When we compiled the numbers for the year we came out at around $3.7 billion. That's actually surprisingly better than I expected. Last year we set a record $6.4 billion. Market sentiment told me that it should have been way less but keep in mind that there are companies below $1.5 billion market cap, and pure equity financing is below $100 million, so that was actually quite healthy to see despite the weak market. Of course, deal flow has slowed down. The number of financings have dropped significantly by over 30%. I don't think anybody's surprised by that because as soon as the Federal Reserve started tightening in March, the investor's purse shut tight.

KITCO: Let's talk about that glimmer you saw in November. The market is looking past tightening. We've also seen a nice rebound in metal prices.

HOFFMANN: We saw gold go from a low of 1650 to the 1800s. That gives the gold space massive momentum. The junior resource sector hinges on the gold. If the gold juniors are doing well, usually, the other juniors are doing well. I was happy to see that some of the juniors got some financing over the last four weeks, but a lot of them still haven't financed. I just spoke with Rick Rule, and he expects the next six months to be quite bleak. He's an anti-cyclical investor, and he is looking at very tight deal terms. He thinks he can still get a couple deals done before the tide completely turns

KITCO: Is the lack of financing in 2022 going to hit news flow. Are less results going to be published?

HOFFMANN: Yes and no. I think there's lots of good stories out there, lots of catalysts coming up: preliminary economic assessments and resource updates. Good companies will continue to create shareholder value. They might not always be rewarded for it, but sometimes the market needs a bit of time to digest the news and to understand the value.

KITCO: You had some themes to watch for in 2023. Let's start with resource nationalism.

HOFFMANN: Critical minerals are more and more the focus of the governments, especially in the Western world. There is a sense of urgency. It's the government's job to state to facilitate that. We saw that in late December when the U.S. Department of Defense gave $25 million to Perpetua Resources to secure and develop the antimony part of their [Idaho] project.

KITCO: Permitting is going to be key?

HOFFMANN: Absolutely. NIMBY-ism needs to be addressed. You can't have your cake and eat it, too. [Governments] need to facilitate progress while keeping within environmental guidelines. Don't get me wrong—you can't force your mandates onto other countries. There are so many geopolitical and macro events happening. We need to protect ourselves and need to think ahead a little further.