Outlook for juniors worsening

THE June quarterly reports are set to paint a grim picture for Australia’s junior miners after dismal figures were recorded for the March period.
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Kristie Batten

The BDO Explorer Quarterly Cash Update for the March quarter only confirmed what most already know – the situation for juniors is only getting worse.

The seventh edition of the report showed that 12% of explorers did not conduct any exploration activity, the highest level since analysis began.

A further 20% spent nothing, or less than $A10,000 on exploration, by far the highest level seen by BDO.

Just 11% of explorers spent more than $1 million on exploration in the quarter.

Average exploration expenditure fell for the fifth straight quarter to $539,000, almost half of 2013 levels.

It comes after the Boston Consulting Group released a report this week which outlined a “crisis” in greenfields exploration.

Only 793 junior mining and energy companies lodged Appendix 5B cashflow reports with the ASX for the March quarter, down from the previous low of 814 in the December quarter.

BDO found that 15 companies were suspended, delisted or did not provide a reason for non-compliance in respect to the non-lodgement, while three were the subject of backdoor listings.

The number of companies with sufficient cash to continue to operate for more than two quarters rose slightly to 57% from 53% but remains at critical levels.

According to BDO, 27% of juniors had enough cash to survive only one quarter. Those who were unsuccessfully unable to raise funds in the June quarter would already be out of cash.

By MiningNews.net’ count, 22 companies were queried by the ASX regarding March quarter cash balances, down from 29 in the December quarter, with many not having enough cash to survive the June quarter.

Commodity price falls hit hard in the March quarter with iron ore, nickel, tin and copper all falling to five-year lows.

Only 38% of explorers had positive financing cashflows, the lowest level since the analysis began.

“Good news from junior explorers is really hard to find at the moment,” BDO partner Dan Taylor said.

“Almost one in five have ceased meaningful exploration for the time being, and it’s clear that until commodity prices dramatically improve and demand increases, many companies will continue preserving cash in order to survive the next two or three years.”

Among the success stories for the quarter, four companies moved to production, while 16 companies raised more than $10 million.

Those included equity raisings for Orocobre and near-term producers Wolf Minerals, MZI Resources and Peninsula Energy.

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