Johannesburg, South Africa — 19 August 2013 – Despite an extremely challenging first quarter, the mining finance environment became even more difficult in the three months to the end of June. Falling metals prices, nervous bankers and risk-averse investors all contributed to a slump in funds raised in the mining sector.
Only US$2.28 billion was received in the three months to the end of June, compared with US$5.16 billion in the March quarter and US$6.12 billion in the second quarter of 2012.
According to the latest “State of the Market: Mining and Finance” report from IntierraRMG, the industry is now facing a severe capital drought and concerning levels of debt. The Australian Stock Exchange (ASX) saw a slump in mining financing from US$1.41 billion in the March quarter to just US$0.45 billion in the quarter just ended.
The Toronto Stock Exchange and TSX-Venture did only marginally less business than in the March quarter (US$1.09 billion, compared with US$1.22 billion). The London Stock Exchange was the only major stock exchange not to report lower financing for mining companies (US$0.50 billion, compared with the historically very low US$0.20 billion previously).
As IntierraRMG editorial director, Chris Hinde explains: “At the corporate level, almost the entire drop in financing has been felt by the largest companies. The 555 companies monitored by the IntierraLive mining database that had an end-June market capitalisation of over US$100 million raised just US$1.43 billion in the June quarter, compared with US$4.08 billion in the three months to the end of March.”
This fall of almost 65% among the largest companies landed hardest, not surprisingly, on the producers (with financing dropping from US$3.71 billion to US$1.24 billion). Funding by exploration companies fell 28% to US$1.04 billion.
Hinde concludes: “Cash holdings for the junior companies are now at critical levels (with overall cash balances of under US$10 billion for explorers). Many of the smaller companies will be unlikely to survive until the end of this year unless there is a dramatic reversal of fortune.”
Source: IntierraRMG. For more information, click here.