2024 in review: Mining industry continues to decline

2024 WAS ANOTHER year of declining public mining company numbers as 102 new companies were formed (2023: 121) and 136 died (2023: 142) for a net loss of 34 companies (2023: 21). This continues a trend observed since 2020. Curiously, the prior five-year period (2015-2019) had seen an improvement in the numbers, with a peak being achieved in 2020 (during the COVID-19 crisis). Note in the figure below that the magnitude of losses since 2020 is far less than those of the prior five years. Nevertheless, the industry remains on a downturn. Of the new births, 85 percent reflect existing mineral companies recapitalizing. This is often accompanied by the company changing its name and rolling back its stock. The number of new mineral companies being derived through migration from other industries represent the other 15 percent. There are typically fewer than 20 industry-switching companies each year, with many of the recent entrants coming from the cannabis industry. Over the past five years, the number of births has declined from 229 in 2020 to 102 in 2024. The five-year average is 152 companies per year. On the death side, approximately 55 percent (2023: 65 percent) of the companies expired by changing their names. Another 22 percent delisted (2023: 10 percent) and 20 percent (2023: 18 percent) were either taken over, merged or amalgamated. Curiously, the number of companies acquired annually over the past four years has remained surprisingly stable (between 24 and 27 companies each year). The current death rate of 136 companies in 2024 is lower than the five-year average of 151 companies. As in prior years, gold-focused companies dominate the population, followed in descending order by copper, lithium, silver and nickel companies. Most of these companies are at the exploration or prospecting stage. When discussing the capital plight with investors and senior management teams, the group is quick to point out that new funding has been challenging and is driving these mortality statistics. The TMX Group, which owns the TSX and TSXV stock exchanges, tracks equity financings of its listed companies and its statistics serve as an excellent proxy for the other North American stock exchanges, given that most public North American mineral companies are listed on their exchanges. According to the TMX data, 2024 was a banner year with $7.6 billion having been raised versus $5.8 billion raised in 2023 and $5.6 billion raised in 2022. So why does the market think that there is a dearth of capital? My suspicion is that this mood reflects two factors. Exploration-stage companies are both the principal victims of funding droughts and represent the most listed companies. More specifically, gold-focused firms represent about 45 percent of the total number of companies. One must question why roughly half of the industry is focused on gold (future talk in preparation). In 2020, 141 new gold companies were created and these figures declined each year to 38 by 2024. This reduction probably reflects the overabundance of gold exploration companies. Given the rising gold price, one would have expected the opposite reaction. Normally in a bull market, new investors are flocking to participate in the price rise, leading to a phoenix-rising syndrome across the industry. New investors mean new money to finance existing projects and encourage new ideas. But if the market is already overpopulated and the existing companies are not materially performing or showing progress, then a reduction would be justified. It is impossible to predict trends for 2025. President Trump’s tariff tiff could go either way. If it is short term in duration, then the markets will probably revert to the status quo. Should the tiff continue for a longer time, then we could experience structural changes in the global economy, which could very well lead to a major recession. Should new tariffs survive at any level, then the cost of certain goods is likely to rise. The question is whether these cost increases will trickle down to the minerals industry. If these cost increases are material, expect discretionary spending, such as exploration, to be impacted as management redirect their capital to cover the additional costs. Base metal producers are probably wrestling with where their concentrates are going and who their preferred trading partners should be. Non-tariff-ladened countries such as Australia should benefit from President Trump’s current tariff actions.

2024 in review: Mining industry continues to decline

Authored by: Douglas Silver

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