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While gold’s recent volatility has not made for an easy environment for miners in general, the junior mining space has been particularly hard-hit.

Performance-wise, the TSX Venture Index (CVE:OSPVX), which had 1309 mining stocks listed as at the end of 2012, is down more than 20% so far this year and almost 28% over the last 12 months, while the Market Vectors Junior Gold Miners ETF (NYSEARCA:GDXJ ) is down nearly 38% this year.

But it is the sector’s financial health that is under the microscope. As Canada’s Financial Post notes, analysts at Canaccord Genuity say that more than 575 junior mining companies have less than $500,000 in cash and equivalents, according to their last reported balance sheets.

Recently, SNL Metals Economics Group’s Pipeline Activity Index for January/February dropped to a three-year low, down 43% since October, as the company says poor equity markets have made it extremely difficult for many junior explorers to raise capital. In April, the TMX Group also said total financings on the TSX Venture Exchange decreased 52% from March 2013 and 54% from April 2012.

At the moment, there aren’t many financing options available to junior miners, explains Justin DesRochers, senior industry analyst with SNL Metals Economics Group. While some have been able to find some interest from strategic investors such as major miners and private investors, he says this isnt an option thats available for all. Although an exploration joint venture with a major, intermediate, or well-funded junior can also be a good option, he says, it is only available to the most prospective projects.

Many junior producers, says DesRochers, have also spent nearly all their available funds on development, hoping for $1,600 to $1,700/oz gold.

A drop to $1,400-$1,500/oz really takes a bite out of the margin for most. That said, many junior producers did have decent balance sheets heading into this market downturn, so there probably is room for debt (and perhaps hedging) for those needing funds to ensure they meet their targets. Cutting unnecessary costs will also help, if they havent already done so, he explains.

In terms of initial public offerings, PricewaterhouseCoopers also notes that for the first time in a decade, there was not a single mining sector IPO in the first quarter on either Canada’s TSX or TSX Venture exchange. PwC explains that the mining sector has registered at least two new mining issues on one of the two exchanges every quarter since 2003.

Given the state of the sector, DesRochers says consolidation has been moderate so far, with quite a few peer mergers. But while DesRochers says he has heard estimates from analysts saying up to 50 to 60% of the junior sector will contract this year, he thinks this is an overestimate.

This sector is pretty resilient. Many of these companies are built and run by teams that survived 2008. And contraction didnt amount to what was predicated by many back then either. But if we do get past December 2013 and into 2014 with no financing improvement, then I think well see more wide scale delistings, he says.

Indeed, with the recent drop in the gold price and stagnant base metals prices, DesRochers doesn’t see much hope for improvement in the short term, pointing to the December quarter at the earliest, or more realistically, early 2014.

This type of situation has shown capability to improve quickly in the past, but I dont see it this time. I think any improvement will be very gradual; juniors are just going to have to bide their time the best they can, he says, by focusing their work on the best prospects and making sure they are well-positioned for when markets rebound.