Australian firms exploring for minerals and not yet involved in production are likely to struggle to raise financing for most of this year, after funding in the March quarter hit a four-year low, BDO says.
The advisory firm’s report, which analyses regulatory filings, covers early-stage miners seeking to raise capital to develop their assets.
It showed that, amid uncertainty linked to the coronavirus epidemic, financing cash inflows for the three months to March plunged 48 per cent to $834 million from December, and 8.0 per cent from March 2019.
About 43 per cent of the 650 companies surveyed had less than $1 million in cash at the end of the quarter.
“The thing for exploration companies is that they don’t generally have revenue… It’s almost saying they have lost 48 per cent of their income,” said Sherif Andrawes, BDO’s Global Head of Natural Resources.
“It’s not as bad now as it’s going to be. When we get to the June quarter, I expect we will see less cash, less being spent on administration, less being spent on exploration,” he said. A revival could come as the global economy steadies near year-end.
The sharp decrease reverses a strong growth spend on exploration last year.
Developers that have a defined asset – particularly those with safe-haven gold – will find it easier to raise capital from institutional investors, particularly given mining is stronger than other industries impacted by COVID-19 travel curbs, Andrawes said.
Smaller firms without an asset that rely more on the retail market – and those looking at battery minerals, oil and gas, copper, nickel, zinc – may struggle.