Grant Thornton Jumex: upbeat junior miners in dash for cash
Junior mining companies are still capital-constrained despite the boost to commodity prices since mid-January.
Junior mining and exploration companies are still capital-constrained despite the boost to commodity prices since mid-January.
And because more than half expect they will need to raise funds within the next six months, competition for investor capital is expected to remain “very tight”, according to the latest annual survey of the sector (Jumex) by Grant Thornton.
Extrapolating that survey finding, based on 80 respondents across the 666 ASX-listed juniors, suggests about 350 will be seeking capital before the end of the calendar year.
For many it will be out of absolute necessity, with the Jumex survey, released in Perth today, finding one in four of the juniors, those with a market value of less than $500 million, are holding less than $500,000 cash — just enough to keep the doors open for a year or so.
But it is not all gloom. the national head of energy and resources for Grant Thornton, Holly Stiles, said the tide was turning.
“Everyone seems to be a lot more positive about the outlook,’’ Ms Stiles said.
She said that nearly 60 per cent of respondents reported improved investor sentiment compared with only 15 per cent last year. The ease of raising funds also improved, with 26 per cent of those that did raise funds in the 2016 financial year reporting no challenges compared with 10 per cent previously.
But against the backdrop of ongoing competition for investor capital, the juniors need to turn their attention to how they differentiate themselves. On that score, the board and management of the juniors backed themselves.
Asked what their company’s key competitive advantage was, 59 per cent said it was board and management. Maybe so, but Ms Stiles said it was a little disappointing that more than one-third of respondents believed board diversity such as gender, age, skills, experience and location was either not, or only slightly important.
“Strong board diversity across all its forms means companies are more likely to have a much broader network to draw on to solve problems quickly and effectively,’’ Ms Stiles said.
The rise in Australian dollar gold prices to near record levels before the recent retreat, and the surge of investor interest in the lithium-ion battery thematic, had a predictable impact on the assessment of the juniors on the best commodities.
More than 80 per cent nominated gold as having the greatest opportunities. Copper, lithium, zinc and nickel made up the rest of the top five commodities.
Lithium was a first-time entry into the top five, rising from only a 3 per cent nomination in 2015 to close to 40 per cent.
“It demonstrates the often unpredictable nature of commodity surges and also the flexibility and speed at which junior miners are able to respond to demand, given so many juniors have acquired lithium projects or discovered lithium potential on their existing tenements over the past year,’’ Ms Stiles said.
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