The Junior Mining Market Is Back

For junior mining investors, 2024 has been a mixed bag of patience and promise. While the price of gold and silver has been skyrocketing to levels unseen in over 20 years, junior mining stocks haven’t kept pace.

Many investors who poured money into small cap exploration companies expecting them to follow gold’s surge are getting restless. But things are finally looking up for this lagging sector, and it’s all about where we’re at in the natural resource cycle. Let’s break down what’s happening and what might be on the horizon.

Gold and Silver Are Shining—So Where Are the Juniors?

Over the past year, the price of gold has climbed nearly 38%, with silver up a stunning 42.5%. Yet, despite these record-breaking moves, the smaller companies focused on exploration and discovery, the juniors, have barely moved. The S&P TSX Global Mining Index is up a respectable 23%, but the TSX Venture Metals and Mining Index, where most juniors trade, has only eked out a 9% gain.

What gives? 

The answer lies in understanding how large and small mining companies navigate their roles in the precious metals cycle. Large mining firms like Newmont Corp (TSX: NGT) have been basking in higher prices, increasing production, and capitalizing on high margins. But for smaller companies, the real opportunity often comes when large producers start feeling the need to secure future supply. And here in late 2024, that moment is just arriving.

The Resource Equation: Why Giants Like Newmont Look to the Smaller Names

To understand how the big miners influence juniors, let’s look at Newmont Corporation, the world’s largest gold miner, operating across four continents. Newmont’s primary goal is to produce as much gold as possible at the lowest possible cost.

But mining is unlike most industries—every ton of ore that comes out of the ground depletes reserves. Once Newmont extracts an ounce of gold, it’s gone for good. And unless it adds new ounces to its portfolio, production eventually declines, and so does the stock price.

For a giant like Newmont, replacing these reserves through new discoveries is costly, risky, and time-consuming. Companies like Newmont prefer to purchase assets that are already developed or nearly so. Recently, Newmont acquired Newcrest in a A$28.8 billion deal, marking the largest gold merger to date.

Newcrest itself grew through acquisitions, buying up promising mines like Red Chris and Brucejack to shore up its reserves. By buying Newcrest, Newmont added high-quality, low-cost ounces to its portfolio, but the global giant still needs to continually replenish reserves to meet production demands. That’s where the juniors come in.

Agnico Eagle and the Depletion Dilemma

Agnico Eagle Gold (TSX: AE), the second largest gold producer, faces similar challenges. After its own string of acquisitions, including a merger with Kirkland Lake Gold and the purchase of Yamana’s assets, Agnico has continued to produce significant volumes of gold. But high production volumes mean reserves are also dwindling fast.

Take Agnico’s mines in Mexico, Pinos Altos and La India, which once held nearly 80 million tonnes of gold and silver ore. After a decade of operation, these assets are close to depletion. Agnico has exploration projects, but it’s unclear if they’ll be able to replenish the company’s gold supply at the rate it’s being depleted.

For Agnico, acquiring developed assets is a faster solution, but with competition increasing, the company may soon have to look at even smaller players—putting junior mining companies back in the spotlight.

The Junior Mining Cycle: Positioned for Growth?

As long as gold and silver prices remain high, big mining companies will be on the lookout for acquisitions to secure future production. In fact, the 23% gain in the S&P TSX Global Mining Index and the 45% one-year return on the GDX signal that the metals rally is starting to reach mining stocks. The trend is only beginning to impact juniors, but it’s gaining momentum. Soon, even higher-risk, earlier-stage exploration companies may become prime acquisition targets for larger miners.

For juniors, this translates into real opportunity. As big miners get hungrier for reserves, they’ll go further up the risk curve to secure assets, bringing much-needed capital into the space. Exploration companies that prove their resource quality, viability, and production potential may see increased valuations and potentially, acquisition offers. And with investor attention gradually returning to the sector, the right companies could see significant price moves.

How to Navigate the Junior Mining Space

The challenge, of course, is identifying which juniors have what it takes to make it. As some veteran mining investors will tell you, success often depends less on the project itself and more on the people managing it.

I’ve spoken with Rick Rule, Doug Casey, and Frank Giustra over the last year and they all emphasize the importance of strong management teams in mining. A great deposit in the hands of an inexperienced team can lead to wasted resources, while an average deposit managed well can turn into a profitable operation.

The Deep Dive has hosted numerous junior mining CEOs who’ve given us insight into their companies, strategies, and outlooks. One example is Silver Tiger Metals (TSXV: SLVR), which has been developing a promising silver asset in Sonora, Mexico, close to Agnico’s Pinos Altos. We spoke with their CEO, Glenn Jessome, about how he plans to bring the project to fruition.

For investors, hearing directly from these leaders can provide a clearer sense of who knows what they’re doing and who might struggle if challenges arise.

2025: A Big Year Ahead for Junior Mining?

The signs are there—2025 could be a pivotal year for junior miners. The macroeconomic backdrop is favorable, with sustained demand for gold and silver likely as inflationary pressures and a strong dollar drive more investors into metals. Meanwhile, big mining firms are looking to juniors to secure their future production, meaning higher acquisition interest and more money flowing into exploration companies.

If you’re watching the junior mining space, keep an eye on the fundamentals: Who has strong management? Which projects are positioned in promising jurisdictions? And crucially, who has the financing and expertise to make the most of their assets?

If you want to follow our efforts, subscribe to The Deep Dive to stay updated on all things junior mining. We’ll continue to feature CEOs and industry experts to bring you insights directly from the companies on the frontlines of this cycle. And if you have questions for our guests, let us know in the comments—chances are they’re reading too.

---

Information for this story was found via the sources mentioned and company filings. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.