Only US$2.28 billion of mining finance was received in the three months to June, compared with US$5.16 billion in the March quarter and US$6.12 billion in Q2, 2012.
The industry now faces a severe capital drought and concerning levels of debt. This is according to the latest State of the Market: Mining and Finance Report from IntierraRMG.
IntierraRMG helps exploration and mining companies, financial services organisations, governments and suppliers to track, identify, research and analyse timely business opportunities, with offices in the United Kingdom, Canada, Sweden and Australia. The IntierraRMG team includes mining experts, senior geologists, researchers, software developers and spatial analysts.
As IntierraRMG Editorial Director, Dr 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 end-March.”
This fall of almost 65% amongst 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.
Dr 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.”
Despite an extremely challenging first quarter, the mining finance environment became even more difficult in the three months to end-June. Falling metals prices, nervous bankers and risk-averse investors all contributed to a slump in funds raised in the mining sector.
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 (LSE) 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).