A new advocacy group focusing on the interests of the Canadian junior mining sector was launched on Monday, with its first campaign aimed at putting a stop to “thriving” predatory short-shelling practices.

Chilean Metals CEO Terry Lynch, who launched Save Canadian Mining, said the group was dedicated to helping ensure Canada's capital markets remained viable for junior miners.

"For smaller cap mining companies, short selling activity spooks true investors into selling prematurely, effectively stunting the growth of these businesses at critical early stages,” he said in a media statement.

In 2012, the Investment Industry Regulatory Organization of Canada and the Canadian Securities Administrators removed a 142-year securities trading rule known as the "tick test".

The tick test restricted short selling to positive price changes at the time of the sale (i.e., an investor could only short a stock if it was on an upward trajectory). This change was applied not only to the main listing venue of the TSX-V, but was equally applied across all Canadian trading venues.

The statement notes that since the removal of the tick test, Canadian markets have evolved, and there now exists a dynamic where Canada's junior markets are finding it increasingly difficult to raise capital.

"Short selling activities have increased in the junior mining market since 2012," said Lynch. "The advent of high frequency trading and algorithmic trading are exploiting the combination of a lack of a tick test, with 14 different trading markets to the detriment of one of Canada's most important industries."

Save Canadian Mining is backed by prominent voices in the industry, including TSX-V MD Brady Fletcher, Sprott Mining CEO Eric Sprott, Ontario Prospectors Association executive director Garry Clark and Ontario Mining Association president Chris Hodgson.

"The practice of short-selling plays a role in maintaining a healthy, efficient market. However, TSX Venture Exchange understands that certain changes to market operations in Canada, specifically related to the removal of the tick test, may have had unintended negative consequences for our junior, or more illiquid issuers," said Fletcher.

Sprott commented that, as an active investor in the mining sector, he recognised the need to reinstate the tick test rule.

“Save Canadian Mining is providing leadership for the junior mining community during an important time. Regulations need to change and this campaign is going to help achieve those changes."

Save Canadian Mining plans to meet with government in the coming weeks.