Exploration report reveals US$1.49 billion in financing deals

Funds raised for mineral exploration in the three months to end-December 2012 reveal a welcome improvement compared with the dismal September quarter. Moreover, financings by the exploration (junior) companies themselves also saw growth during the latest period.

As indicated in the quarterly State of the Market Exploration Report by IntierraRMG, financing for exploration reached US$1.49 billion in the quarter just ended, compared with only US$0.65 billion in the three months to end- September. The Toronto Stock Exchange (TSE) was the largest source of exploration funds for the quarter (US$586 million) followed by the Australian Stock Exchange (ASX; US$519 million) and the TSXVenture Exchange (US$319 million); all measured in terms of the primary exchanges for each financing.

The Report notes that there are almost 3,500 listed companies in the international mining industry, and the sector had a combined market capitalisation of just over US$2,500 billion at the end of the December quarter. The top 681 companies (those that each had a year-end market capitalisation of over US$100 million), accounted for 98% of the industry's overall market capitalisation, and 84% of the combined financing during the December quarter.

Commenting on these findings, IntierraRMG’s Managing Director, Peter Rossdeutscher, stated: “The majority of the companies in the industry are extremely small. At the end of December 2012, we estimated that there were 1,756 companies (i.e. about half of the total) with a market capitalisation of under US$10 million. There were a further 817 companies (almost one-quarter of the total) with a year-end market capitalisation of US$10 - 49 million.”

The companies that represented the smallest 50% of the industry, raised less than 3% of the total financing in the past quarter, equivalent to just US$102,000 for each company. With funding scarce, many of these smaller companies remain in a period of dormancy as they ride out the current weakness in debt and equity markets. The situation remains especially difficult for those with little prospect of early cash flow.

Mr. Rossdeutscher continued; “With the lacklustre commodity prices, valuations for the smaller companies have remained depressed. As the IntierraRMG exploration report indicates, this has made it difficult to finance projects by raising equity through public offerings. With their large cash holdings; we expect bids from the majors for some of the struggling juniors that have attractive projects.”

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Based on IntierraRMG information