PERTH (miningweekly.com) – Junior miners and explorers are still faced with constrained capital markets, with about 41% of respondents holding a cash balance of less than A$2-million.

This is according to a Grant Thornton report, which also stated that 46% of junior miners and explorers would need to raise capital within the next six months, with more than half of the respondents expected to price their next equity raising at a significant discount to share prices.

Grant Thornton noted that the volatility of commodity prices was the second-highest constraint for juniors during 2013, while deteriorating share prices was listed as the third-biggest constraint.

The impact of the falling share price also resulted in further difficulty in raising capital, which resulted in delays in progressing projects and thus building further value for the companies.

The advisory firm warned that for the 2014 financial year, there did not appear to be any prospects of improvement, with the lack of the availability of equity funding expected to continue, along with continued commodity price volatility and the instability of financial markets.

“While the immediate environment is particularly difficult for junior companies, capital will return in the medium to long term,” the report said.

It added that current levels of exploration expenditure were likely to be insufficient to provide a pipeline of mines to meet future demand for commodities. As this shortfall is identified, the laws of supply and demand would result in capital flowing back to the companies.

Despite the current funding shortage, the Grant Thornton report found that about 49% of respondents were considering acquiring projects within the next 12 months, with Australia remaining the most popular location for new project acquisitions, followed by Africa.

Over half of the respondents were considering joint ventures and around 20% were considering the takeover of other companies, or mergers.

“Companies that are fortunate to be in a strong cash position are ideally placed to capitalise on depressed share prices and, in some instances, companies in distress. We expect to see further industry consolidation,” Grant Thornton stated.

It added that the ability to add advanced exploration projects with proximity to their current portfolios would be appealing for junior producers, especially if current mining operations could benefit from additional scale and synergistic benefits.