Dismal investor interest remains the main worry for most junior companies in the mining sector and, as a result, market uncertainty will continue to be the major influence on the mining industry worldwide in 2014 for junior and major mining companies, says global financial information provider SNL Metals & Mining.

In its ‘World Exploration Trends 2014’ report, the company states that, without the near-term resumption of financing, junior companies will be forced to further restrict exploration spending.

“The persistent uncertainties, financing difficulties and reduced drill programmes resulted in a decrease in the yearly amount of new resources added to the pipeline in 2013. The number of initial resources for new zones and deposits fell to only six a month in 2013, from 14 a month in 2012, while the US dollar value of the resources announced in 2013 plunged to about a quarter of the 2012 value,” says the report.

SNL Metals & Mining further mentions that many juniors that had the most promising initial resources only registered mixed results in attracting funding for their 2013/14 programmes, while most others that had new deposits attracted less investor interest. The junior sector’s lagging in exploration activity becomes apparent when comparing the timing of successful financings with the timing of announced exploration successes and initial resources.

While the 2008 global economic downturn was relatively short-lived in terms of metals prices and mining profitability, the junior sector took almost three years to resume adding resources at new deposits to the pipeline at precrisis levels, states the report. It adds that, after financings peaked in late 2010, reports of initial finds and new zones peaked almost a year later, while initial resource announcements followed suit in 2011.

Also, with the number of new finds and initial resources in 2013 dropping to below the levels of early 2009, a rebound in the numbers of initial finds and resource announcements seems unlikely before 2015, the report points out.

“Although we believe that most producers made their largest exploration budget adjustments in 2013, a combination of uncertain demand and poor quarterly and yearly results will likely result in further capital conservation initiatives, including a reduction in producers’ exploration budgets. Given these forecast scenarios, we expect a modest decrease in exploration budgets for 2014, compared with those of 2013,” highlights the report.

In 2013, many larger players significantly reduced late-stage allocations and focused more on early-stage and mine-site work. They recognised the long-term need to replace production through the discovery of new large-scale deposits, and the near-term need to replace and upgrade reserves through exploration at existing operations as high-quality, large-scale acquisitions became more scarce.

Several larger producers also decided to focus on their main assets and to divest noncore projects. The number of advanced assets currently on the market is attracting interest from some smaller producers and from unconventional players, such as private-equity funds, sovereign wealth funds and commercially orientated State-owned entities, which are also being targeted by junior miners as sources of funding.