Financing for miners drops 56 percent in Q2 2013

The mining industry has been hurting from a trifecta of low commodity prices, rising production costs and labour disputes, but here’s another worry to add to their troubles: According to a study by the IntierraRMG intelligence group, financing for miners dropped 56% in the June quarter.

The finance environment has become “even more difficult” than an already troubled first quarter, the research firm said in a statement after looking at more than 500 miners.

Companies only managed to scrape up a combined $2.28 billion in Q2 2013, compared to $5.16 billion in the quarter before and $6.12 in Q2 2012.

“Falling metals prices, nervous bankers and risk-averse investors all contributed to a slump in funds raised in the mining sector,” Intierra writes.

The industry now faces “severe capital drought” in addition to “concerning levels of debt.”

Looking at major mining countries, the report shows that the Australian Stock Exchange (ASX) saw a slump of more than 50% with funds totalling less than $500 million. Things were better on the Toronto Stock Exchange (TSX) and Venture market (TSX-V) where miners collected $1.09 billion compared with $1.22 billion in the March quarter. Europe escaped the carnage altogether, showing now drops in financing on the London Stock Exchange (LSE).

“At the corporate level, almost the entire drop in financing has been felt by the largest companies,” Dr. Chris Hinde, Intierra’s editorial director said.

For producers, financing was down 65% while exploration companies saw a 28% drop.

Hinde went on to warn that cash levels for juniors are at “critical levels,” with many of the smaller companies “unlikely to survive into the next year.”