Funding still an issue for miners, especially juniors: report
March-quarter exploration and production results from the resources sector flooded in last week to meet the end-of-April deadline, revealing that while the sector seems to be on its way up, funding remains an issue, especially for explorers.
In its latest report on the state of the market published Tuesday, SNL Metals&Mining reveals that the combination of investment banks falling out of love with commodities, and IPOs not serving the smaller companies, continues to burden mining companies big and small, particularly explorers. This, say the analysts, is reflected by the mere US$7 billion raised by the mining sector in the first quarter of the year, with only $1.6bn going to juniors.
Metals markets, says the report, remain dull, but stable. Copper, a main indicator of global economic health, is expected to remain lethargic for the remainder of the year, with most investors seeing better opportunities in other metals, particularly nickel and tin, SNL says.
Nickel continues to be the sector’s star, as the metal hit a 14-month high of US$18,000/t in mid-April. Price for the commodity have jumped 29% so far this year thanks mainly to the Indonesian ore export ban, which came into force last January.
Gold barely shining
SNL experts say that while the Ukraine-Russia conflict has had little effect on the gold price, which seems to be locked within a tight range around $1,340 per ounce, bullion prices are expected to keep falling through 2015.
Adding to the bad news, the report highlights that —based on the number of prospects reporting drilling results in the quarter just ended (856)— exploration is at only 56% of the year-ago level (1,517), which was itself just 62% of the number of prospects reporting drilling in the first quarter of 2012 (2,465).
And while the mount of merger and acquisitions (M&A) in the first quarter of the year shows an undeniable increase, the experts note that jump was achieved in conditions of tight finance, raising about $7 billion, compared from the $9.8 billion registered in the quarter ending in Dec. 2013.
When it comes to regional activity, SNL experts say that although Asia is dominating metals production, Latin America remains an important target for mine development. The region maintained its top position in 2013 in terms of the number of projects and the capital expenditure commitments for the 1,307 development projects with capex estimations.