Survey reveals challenges for juniors

New survey data suggests the landscape of the junior mining sector will be markedly different when the global financial crisis recedes.

New survey data suggests the landscape of the junior mining sector will be markedly different when the global financial crisis recedes, according to accounting firm Grant Thornton.

In a survey of junior mining and exploration companies listed on the ASX 200, the firm found that most respondents had faced major challenges as a result of the conditions.

A large majority of 83.8% said they were forced to make changes to their business as a result of the economic conditions, while 47.5% anticipated further changes in 2009.

Furthermore, nearly all believed their current share price significantly undervalued their company and its assets.

The survey revealed that 70.2% had cut costs, 65.7% had ceased expenditure on exploration projects, 55.2% had cut staff and 23.8% had sold off their assets.

Around one third of the companies anticipated further staff cuts in 2009.

According to Grant Thornton, there are currently a number of companies suspended from trading on the ASX due to financial uncertainty.

“This will inevitably lead to receiverships and liquidations if funds are not raised in the near term,” the firm said.

The majority of the respondents believed they would need to raise finance in the coming 24 months.

Of those, 60% would do so via a private placement, 43.8% by way of a rights issue and 37.5% via a joint venture partner.

Over three quarters of the juniors were considering a major transaction over the next 12 months, including a joint venture, merger or acquisition.

According to the firm, junior exploration companies account for around 80% of all resource companies listed on the ASX.

However, since September 2008 new initial public offers of junior explorers have declined more than 75%.

Market capitalisation of all the junior mining and exploration companies dropped 36% from $34.3 billion on 30 June 2008 to $21.9 billion on 30 June 2009, the firm said.

While the majority were finding it difficult to adhere to the obligations and regulations of the ASX, only 1.3% of companies would consider delisting.

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