While junior and intermediate mining companies raised 17% more capital in March and April, compared with the first two months of the year, increasingly tough markets will likely choke off some exploration work, Nova Scotia-based Metals Economics Group (MEG) said last week.
“Drilling activity remains lower than the highs of 2011 as adverse markets continue to make financing very difficult for early-stage explorers,” the consultancy said.
As concerns over Greece’s economy and a Chinese slowdown swelled, investors fled commodities and mining equities, both seen to be risky investments.
Markets continued to slide in May, with gold falling over 7% during the month to bottom at $1 536/oz, before staging a recovery to above $1 580/oz.
MEG said drilling for the yellow metal has remained stagnant since peaking in November.
“As long as adverse markets continue to make equity funding scarce, particularly for early-stage explorers, drilling activity will likely remain below the highs of late 2011.”
Junior and intermediate companies raised $2.6-billion during March and April in finan-cings worth more than $2-million each.
While gold financings were flat during the two months, the $712-million in debt raised during the period is almost quadruple the financings the industry raised in January and February, and is the highest two-month debt total in the MEG Industry Monitor’s four-year history.