Cash-starved junior miners poised for next leg of gold equity rally - Crescat’s Kevin Smith
The mining sector has seen renewed bullish momentum since mid-2025; however, the rally has not been as broad-based compared to previous bull market cycles, as most of the attention has been focused on senior producers and royalty companies.
The VanEck Gold Miners ETF, a basket of the world’s largest precious metals producers, has rallied more than 200% since the start of 2025. However, the TSX Venture Index, which reflects more junior developers and explorers, has rallied 85%.
Despite the recent gains, gold investors have not missed the rally in mining equities, and the sector’s next phase could be driven by capital returning to junior exploration companies after more than a decade of underinvestment, according to Crescat Capital Founder and CEO Kevin Smith.
Speaking to Kitco News on the sidelines of the Prospectors & Developers Association of Canada (PDAC) 2026 convention, Smith said sentiment at this year’s conference reflects growing interest in the sector, even if many investors remain cautious.
“There’s definitely a different vibe,” Smith said, noting larger crowds and stronger attendance across the convention floor. “There are more people, more booths… you can’t even find a chair.”
While the improved sentiment signals renewed attention on the mining industry, Smith said many investors are still hesitant to commit capital despite the strong performance in gold and mining equities over the past year.
Despite concerns that investors may have missed the rally, Smith said Crescat continues to actively invest in mining equities and believes the sector remains early in a long-term bull cycle.
“We are absolutely buying,” he said. “A lot of investors probably do feel like they’ve missed it… but we think it’s still early in the cycle.”
Smith said the junior exploration segment is attractive because it has been cash-starved for more than a decade, leaving exploration severely underfunded and creating structural supply shortages.
“Where we’re focused — the exploration segment — has been capital starved for so long that there are big fundamental supply and demand imbalances,” he said.
Smith said Crescat’s strategy focuses heavily on early-stage exploration companies, where the potential upside from major discoveries remains the greatest.
However, he acknowledged that investing in junior exploration companies carries significant risk and requires deep technical expertise.
“You need a big Tier-1 scale geologic target,” he said. “It’s got to be in a jurisdiction where you can ultimately build a mine.”
While management quality, jurisdiction, and capital structure all matter, Smith emphasized that geology ultimately determines whether a project can succeed.
Lack of discoveries highlights long-term opportunity
One of the challenges facing the sector is the limited number of major new discoveries in recent years. Smith said this reflects the prolonged lack of exploration investment.
However, Smith said that this environment also presents opportunities for investors. He explained that the scarcity of major discoveries could eventually drive stronger valuations across the sector as producers compete for new resources.
Smith said another factor keeping some investors on the sidelines is the need for confirmation that higher gold prices are sustainable.
After a period of sharp volatility in the metals market, he said a period of consolidation could help build confidence among institutional investors.
“It’s okay if we take a breather here,” he said, adding that healthy pullbacks allow investors to accumulate positions on dips.
Looking ahead, Smith expects the next phase of the precious metals rally to be driven by a broader shift in global capital flows away from large-cap technology stocks and toward commodities and hard assets.
“We call it the great rotation,” he said. “Money will start rotating out of the overvalued large-cap equities and mega-cap tech, and into undervalued commodities and hard assets.”
In this environment, gold remains the cornerstone of the trade. “Gold is the number one anti-dollar trade there is,” he said.
Smith believes that the gradual return of investor confidence, combined with improving metal prices and renewed exploration success, could drive a prolonged rally across the mining sector.
“Money chases performance,” he said. “There’s a lot of performance ahead that’s going to pull these investors in.”
