Grant Thornton Australia’s annual JUMEX survey found that there had been a drastic improvement in conditions for junior miners and explorers over the past year.
The report found that 60% of juniors had seen an improvement in investor interest or even strong interest, compared to only 15% last year.
Just over a quarter of juniors experienced no difficulty in raising cash, up from just 10% in 2015.
Grant Thornton Australia national head of energy & resources Holly Stiles said there had been a strong improvement in fundraising success.
“Investor interest initially concentrated on certain commodities, but has started to reach out more broadly, particularly to those with low risk, advanced stage assets,” she said.
Unsurprisingly, gold companies attracted the most interest, with more than 80% seeing it as a strong prospect for growth, but lithium also emerged, despite just 3% of respondents in last year’s survey seeing it as one of the most attractive commodities.
Nearly 40% of respondents this year saw lithium as a commodity that offered the greatest opportunity for the year ahead, just behind copper but ahead of zinc.
“The recent boom in lithium interest is a great example of how rapidly perspectives on commodities can surge and a testament to the flexibility and speed at which junior miners are able to respond to demand, given so many juniors tapped into that interest over the past year, refocusing their businesses by acquiring lithium projects or discovering lithium potential on their existing tenements over the past year,” Stiles said.
However, 71% of respondents experienced working capital constraints during the 2016 financial year, and a quarter are operating with less than $500,000 cash.
“Many junior miners are still very cash constrained with half the respondents anticipating a need to raise funds within the next six months, meaning around 350 companies of similar nature will be capital raising in the same period and therefore competition for investor capital will remain extremely tight,” Stiles said.
Stiles said now was the time for companies to position for the next phase.
“Those with existing assets, focused on attractive commodities with no significant negative factors, focus hard on those projects,” she said.
“Raise funding as quickly and as efficiently as possible and fast track development to deliver the best shareholder outcomes.
“Juniors looking for new projects, be selective and get it right – focus on mainstream commodities and quality jurisdictions. Minimise risk and you will maximise your funding options in the future.”
The survey results echo the findings of BDO’s June quarterly explorer update released last month, which concluded that the worst may be over for small-cap companies.
BDO found that the average exploration expenditure for the June quarter increased for the first time in nine quarters, from $A360,000 in March to $418,000, and there was an increase in the percentage of companies that had exploration expenditure in excess of $300,000 to near 30%.
There was also a big jump in the number of companies with positive financing cashflows, with 50.9% able to raise funds through equity markets or borrowings, up from 42.3%.
