SINGAPORE, March 28 (Reuters) – Small miners are finding it increasingly difficult to raise capital to fund new ventures despite the positive demand outlook for several commodities and a world still largely awash with cheap credit.
The problems facing these ‘junior’ mining explorers may also have implications beyond a bunch of seemingly inconsequential companies struggling to progress. How they cope is likely to affect how the mining industry as a whole goes from exploring for new resources to actually producing raw materials.
Under the traditional model, would-be junior miners raised seed capital in order to drill exploration holes to confirm the presence of a resource. These companies then sought listings on miner-friendly stock exchanges, such as those in Sydney and Toronto, and used the money raised from the listing to advance the project.
After that it was a game of seeing whether companies actually build and operate a mine, or whether a bigger player would come along and make a takeover offer.
But what has become clearer is that in recent years junior miners are struggling to even get past the first stage, and if they do, the listing of small capitalisation companies is no longer proving attractive, even to risk-seeking investors.