A survey of 389 mining executives in Australia, Canada, South Africa and the UK showed that 58% of Australian executives rated increased government involvement as a “major constraint to growth”
This result was the highest of all countries surveyed.
The research by financial adviser Grant Thornton’s energy and resources team revealed that just 47% of Australian respondents believed public policy in Australia supported exploration, compared to 73% overall.
“The current government is doing little to support exploration companies, and it doesn’t really have the interests of junior miners on its agenda,” said Grant Thornton Australia energy and resources head Simon Gray.
“This is a concern as a prolonged period of reduced exploration has the potential to set back future discoveries impacting the viability of the industry.”
The report identified deterrents to junior resource companies as increased regulations, a tepid funding environment and rising costs.
A combination of macro factors have prompted many miners now looking to alternative financing arrangements such as private equity, hybrid financial instruments, monetisation of non-core assets, mergers and acquisitions.
The survey found 53% of junior miners had cash balances of less than $2 million and 51% needed to raise cash within six months.
Regulatory roadblocks were highlighted to include lengthy licensing procedures, increased government involvement and exploration rights uncertainties.
Forty-two per cent of respondents said increased government involvement constrained growth while 44% said disputed exploration rights and asset titles were a “significant” or “moderate” issue in the country of their flagship project.
This figure clashed with an optimistic measure that 73% of mining executives believed public policy encouraged exploration in the country of their flagship asset.
Fifty-five per cent of executives said they expected costs hikes related to labour to increase this year while 42% said energy costs would be more severe.
The report suggested mining companies react to these challenges by pursuing financing in ways that address investor concerns about the sector while positioning their own organisations as sound, strategic enterprises.
It said new strategies would be needed to adapt to rapidly changing local sentiment and regulations.
Cost pressures would have to be addressed through the embrace of procedures, technologies and automation which could minimize the adverse effects of labour and energy expenses.
“It is a challenging time for the sector, especially junior miner,” Grant Thornton global mining leader Mark Zastre said.
“But growth can return. The risk-return equation will change once investors develop a renewed enthusiasm for potential high returns that few other opportunities offer.”
