Mining Finance Drops 56% in June Quarter

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. Only US$2.28 billion was received in the three months to end-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 now faces 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 (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).

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.”

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State of the Market Reports detail the state and outlook of the mining industry focusing on data-driven trends in exploration, metals production, mining and finance. They provide data and opinion on the closed quarter, plus forward views on the upcoming period.

Based on IntierraRMG information