Todd Ross
Director
Westpac Natural Resources
Government intervention through the introduction (then
withdrawal of a “super profits tax”), the Minerals Resources
Rent Tax and the carbon tax have all contributed to the
global investment community’s nervousness about investing
in Australia. When combined with the already high costs of
labour and materials, government regulation, native title and
declining commodity prices, the ability to access capital has
been severely hampered.
Australia’s mining industry is resilient and nimble. While
things are tough and there seems no immediate relief on the
horizon, junior to mid-cap resource companies are increasingly
turning to alternative markets to fund themselves.
There are 589 listed mining companies on the Australian
Securities Exchange, with a total combined market
capitalisation of approximately A$381 billion. Since March
2013
around 70 companies have been delisted as a consequence
of mergers or acquisitions, or have gone into administration.
Not surprisingly the combined market capitalisation has fallen
some 12% since March. Also not surprisingly, the top 10 listed
mining companies make up a staggering 92% of the total market
capitalisation of the mining sector in Australia, while 68% have
a market capitalisation of less than A$20 million.
There is no denying that the equity market picture for the
Storm associated with Cyclone Laurence
Simon Phelps Photography
Funding challenges facing the mining sector
There is no denying the challenges faced by the mining
industry over the past twelve months to raise the necessary
capital for exploration and project development, especially
for an industry reliant on traditional equity and bank debt
markets, that for the time being appear to have all but
dried up. A perfect storm has been brewing that has starved
the sector of capital and threatened the very viability of
the resource industry in Australia going forward.
In this article, Todd Ross, Director at Westpac Natural
Resources, explores the state of traditional capital markets
and discusses the various alternative sources of funding
available that are currently being employed.
Capital’shiddencalamity
Minesite 2013
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