Ernst & Young: Financing for junior and mid-tier miners may be challenging

By Rob Starr, Content Manager, Big4.com

Data to the end of September suggests full year 2012 capital raisings in the mining and metals sector globally could be the lowest since 2009, with a sizeable proportion of this year’s raisings from record corporate bonds issues from larger companies. Paul Murphy, Ernst & Young’s Australia and Asia-Pacific Mining & Metals Transaction Leader comments on the situation:

“Outside the largest mining companies, financing remains extremely difficult, which when combined with low equity valuations is creating opportunities for those with cash – and increasingly this cash resides with the private wealth community, including specialist sector funds,” he says.

Preliminary analysis by Ernst & Young suggests private capital investors accounted for 21% of mining M&A globally in the nine months to 30 September 2012 versus just 12% for the same period in 2011.

Ernst & Young Debt Advisory practice joint leader Sebastian Paphitis says companies trying to find finance have their work cut out getting the right deal.

“Big or small, public or private, finding finance is no longer a simple equation but the good news is there are a bunch of alternative options that are available,” he says. “While the very largest players have the depth of internal expertise to navigate the options, for everyone else it can be a bit like trying to put together a 1000-piece jigsaw puzzle.”