Strain showing as markets continue to pummel miners

Vancouver – The strain that the global financial meltdown is placing on junior explorers becomes clearer every day. From reduced financings to cancelled acquisitions and scaled-back exploration programs, juniors are doing all they can to simply survive the turmoil.

The hardship is hitting companies across the board, from those working on grassroots exploration to producers. And a company’s assets seem to have little impact on its share price indeed some companies’ market caps are less than they money they have in the bank.

What follows are some examples of what the global credit crunch is doing to Canadian mining stocks.

Coro Mining (COP-V)

Coro is a Vancouver-based junior explorer with properties in Chile and Argentina. With its Argentinean project stymied by a Mendoza-province ban on the use of “toxic” chemicals, including sulphuric acid, the company wanted to acquire a producing mine to attain production and cash flow.

Coro found its mine in Cerro Negro, a combined open pit and underground operation in Chile’s central Petorca province that produces copper cathodes and concentrates from flotation. In February the company signed on to an option agreement to acquire the mine for US$40 million. It put down the first $1 million in March and the second in July, and had until early October to find the remaining $38 million.

By August Coro had arranged financing through Dundee Global Resources, which agreed to undertake two private placements totalling $15 million and provide Coro with $25 million in debt. The first, $3-million financing closed quickly, comprising 2 million units at $1.50 a piece, each unit containing one share and half a warrant exercisable at $2. The company said at the time it expected to close the second, $12-million financing in late September.

Instead, in late September Coro repriced the second financing to $1 per unit, with warrants exercisable at $1.50. Then in early October Coro halted its share to announce that the second financing was not going through and the company would not be buying Cerro Negro.

In explaining the decision Coro said current credit conditions make refinancing of the partnership bridge debt facility uncertain on both a 12 and 24-mont horizon. The company also noted that near-term weakness in the price of copper due to slowing economies worldwide would negatively impact Cerro Negro. Despite the rationale, management was clearly disappointed.

Coro’s share price lost 40 on the news, falling to 50 from 90. In the following week of market turmoil Coro shares fell farther. On Oct. 15 Coro closed at 35. The company has a 52-week trading range of 21.5 to $2.09 and has 36.2 million shares issued.

Bluerock Resources (BRD-V)

Bluerock is developing several uranium mines in the Uravan district of the US. In late September the company excitedly announced the achievement of several milestones: and.

Bluerock has a toll milling agreement with Denison Mines to ship ore from the company’s most advanced project, the J-Bird mine, to the White Mesa mill. In the first half of September Bluerock produced its first ore from J-Bird: 240 tons of development rock. And over at its development-stage Cone Mountain project, Bluerock had advanced the underground decline to over 20 metres.

Then, one week into October and following a share price drop to 6.5 from a high of almost 90 in March, the company announced a two-week shutdown of US operations while management works to ensure adequate working capital to continue its development and production plans.

Bluerock is currently trading at 4. The company has 46.9 million shares issued.

ValGold Resources (VAL-V)

Many companies have been forced to curtail planned exploration programs in the face of share price free-falls, which make raising capital a difficult and dilutive prospect. ValGold is one such company.

The Vancouver-based junior has two gold exploration projects in Venezuela and two gold projects in Ontario as well as an option agreement with Newmont Overseas Exploration to earn an interest in certain properties in northwest Guyana. The junior had been advancing mid-sized exploration programs in Ontario and Venezuela. In the past year ValGold has completed two resource estimates: 253,100 indicated tonnes grading 7.7 grams gold per tonne plus 1.6 million inferred tonnes grading 4.93 grams gold at the Garrison project in northeast Ontario and 1.2 million indicated and inferred tonnes grading 2.76 grams gold at the Los Patos deposit in Venezuela.

But on Oct. 8 the company announced a “major change in strategic direction” in response to continuing market conditions. The company says it now intends to focus on efforts only onto projects with demonstrated resources; early state or greenfields projects “appear to be not financeable” and thus will be dropped.

As a first act under this strategy the company terminated its option agreement with Newmont in Guyana. A few days later it optioned 50% of its Tower Mountain gold property in Ontario to HMZ Metals.

A year ago ValGold was trading at over 30. The company’s shares now sit at 4. ValGold has 90 million shares issued.

Majestic Gold (MJS-V)

Speaking of the difficult and dilutive nature of financing in the current market, Majestic Gold just announced a $4.9-million financing. The junior plans to place up to 98 million units at 5 per unit, with each unit comprising a share and a full warrant exercisable at 10.

If Majestic can fill that order, it will more than double the junior’s outstanding shares, of which there are currently only 67 million. At the end of the news release announcing the financing the company added that it will need additional financing to repay a $2-milloin loan.

Majestic is currently trading at 3.5.

Nautilus Minerals (NUS-T)

The company pioneering deep-sea mining is in no danger because of current market conditions but it provides a good example of how undervalued many companies are today.

Nautilus has almost $300 million in the bank. Its current share price is $1.32, which puts its market cap at just under $194 million.

When a company’s market cap is less than two-thirds of its cash on hand, you know markets conditions are bad.