Following another year of volatile and declining commodity prices across the board, most junior mining and exploration companies are doing it tough, but there is good news for gold juniors.
Emerging with the brightest prospects, 63% of mining executives see the greatest opportunity over the coming year in the precious metal provides; followed by copper (50%), zinc (36%) and nickel (23%), according to the latest findings from the Grant Thornton 2015 JUMEX survey.
“This will be a welcome ray of hope for a significant portion of junior miners given the extremely challenging conditions that persist in the sector. Whilst there are companies who are achieving success - mainly in developing projects - the vast majority of junior miners are facing ongoing cash constraints, continuing falls in share prices, volatile commodity prices and disgruntled shareholders, which are all taking their toll,” said Holly Stiles, National Head of Energy & Resources, Grant Thornton Australia.
Competition for capital & growing trends ahead:
One positive aspect of the ongoing market conditions is a growing level of collaboration across the broader industry, particularly between miners and service companies, as industry participants look creatively for ways to do things differently. Mining service companies are feeling the knock on effects of reduced spending by juniors, in addition to being hit by extreme pressure to improve productivity as the majors cut costs. The best outcome for the industry is for all participants to find ways to do business differently for mutual benefit.
“To grow value in an extended period of market downturn it is imperative that junior miners maximise every cent of expenditure and be ever more creative in structuring solutions to fund and develop their projects. I believe that increased collaboration between industry participants can only be good for the sector as a whole,” said Ms Stiles.
Innovation extends to capital raising. Competition for capital is extreme, with 50% of junior miners planning a fund raising within six months and 29% having a cash balance of less than $500,000. As pressure continues to grow, increasing numbers of juniors are looking overseas for investment. However, with investor interest in mining constrained across the globe, expectations are that there will unfortunately be an increased number of business failures, consolidations and exits from the sector through back door listings.
“With capital constraints tighter than ever, junior mining executives need to innovate to find solutions to progress their projects. There are a wide range of new and interesting technologies that can assist and we encourage JUMEX executives to explore a variety of options and embrace technology that may assist in adding value in a cost effective way,” said Ms Stiles.
The survey also revealed a growing trend for junior miners to re-focus on Australia for future project opportunities, with 89% of respondents considering acquisitions having Australia on their shortlist, with Africa the next most popular jurisdiction (19% of respondents are considering Africa).
“Following a trend over recent years to look overseas for new opportunities, the refocus locally is positive for the Australian industry as a whole”, said Ms Stiles.
To access a full copy of the Grant Thornton 2015 JUMEX Survey click here
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