IntierraRMG reported that its database of almost 3500 listed companies showed that funds raised by the mining sector in the March quarter dropped to less than $US5.2 billion ($A5.25 billion) from roughly $6.8 billion in the last three months of 2012.
The second half of last year saw a gradual recovery in the mining industry’s overall market capitalisation thanks to a strengthened gold price but falling metal prices in the first months of 2013 have been damaging, particularly to smaller companies.
Initial public offerings have historically played an important role in generating cash for mining projects but decreased market confidence has slowed IPO activity significantly and retail and professional investors do not have the means or the interest to fund as many equity raisings.
“With their share prices low, most explorers can’t realistically raise the necessary funds to bring themselves to the stage where they can generate cash flow from metals production,” IntierraRMG said.
Exploration companies have only raised $1.5 billion in the three months to March 31, less than half of the $3.4 billion raised in the December quarter.
Mining companies on the London Stock Exchange saw an 80% slump quarter-on-quarter for raisings when they only brought in $200 million.
The Australian Stock Exchange and Toronto Stock Exchange also saw sharp drops, with nearly 80% of funds raised by companies with individual market capitalisations above $100 million.
Though the smallest companies, valued under $10 million, saw an improvement from an especially sparse December quarter, the amounts raised were still well below those brought in during the March quarter 2012.
IntierraRMG said it was especially troubling as the March quarter had historically been a strong one for capital raisings, with the conclusion that 2013 could be a rough year for the mining sector.
“This is particularly worrying because companies have typically raised most of the necessary funds for project development during the first quarter of the year,” the company said.