Mining finance dropped 56% in the June quarter, according to the latest ‘State of the Market: Mining and Finance Report’ of IntierraRMG.
The mining finance environment became even more difficult in the three months to end-June than it was in 2013’s extremely challenging first quarter.
Falling metals prices, nervous bankers and risk-averse investors all contributed to the slump in mining funds raised.
Only $2.28-billion was received in the three months to June 30, compared with $5.16-billion in the three months to end-March and $6.12-billion in the second quarter of 2012.
The industry, the IntierraRMG report says, now faces a severe capital drought and worrying levels of debt.
The Australian Stock Exchange (ASX) saw a slump in mining financing from $1.41-billion in the March quarter to just $0.45-billion in the June quarter.
Funding by exploration companies fell 28% to $1.04-billion, with the cash holdings of junior mining companies critically low.
Many of the smaller companies are not expected to survive the year unless there is a dramatic reversal of fortune.
Hundreds of millions of dollars of planned capital investment in mining projects is being delayed or cancelled.
In South Africa, retrenchments are beginning at management level and many senior mining people are already on the streets.
Some of the lossmaking mines may be forced to curtail their activities, or even close, which will be a major blow for the South African economy, given that mining is the flywheel of the South African economy and most of the country’s export revenue.
Some unions are distributing media releases revealing that major mining companies are offering many of their members voluntary severance packages.
Executives are urging the South African government to work out how it can help to save mining operations from closing.
Many are forecasting the need for fiscal relief at a time when government will want to collect all the tax it can.
From public platforms, others are pleading for the South African mining industry to find common ground on wages and pointing out the negative impact of paying above-inflation pay increases without a concomitant improvement in productivity.
It is often in times of crisis that long-lasting solutions are forged.
One certainly hopes that this is one of those times.