All investors interviewed as part of the JUMEX Survey expressed a keen interest on new exploration opportunities. Image: State of Queensland. Photography: Ray Cash.
By Elizabeth Fabri
JUNIOR miners and explorers have much to look forward to as investor interest returns to the sector, according to a new report.
Grant Thornton’s annual JUMEX Survey reported a sustained six month market improvement in investor sentiment, primarily towards commodities such as gold and lithium.
“We’re seeing a strong improvement in fund raising success,” Grant Thornton Australia head of energy and resources Holly Stiles said.
“Investor interest initially concentrated on certain commodities, but has started to reach out more broadly, particularly to those with low risk, advanced stage assets.
“The recent boom in lithium interest is a great example of how rapidly perspectives on commodities can surge and a testament to the flexibility and speed at which junior miners are able to respond to demand, given so many juniors tapped into that interest over the past year, refocusing their businesses by acquiring lithium projects or discovering lithium potential on their existing tenements over the past year.”
Ms Stiles said 60 per cent of the surveyed companies reported signs of strong investor interest compared to only 15 per cent in 2015.
In 2016, $330 million has been raised by Australian nickel companies alone.
However, 71 per cent of respondents experienced working capital constraints in the year with one in four of the surveyed companies operating with less than $500,000 in their pocket.
“Many junior miners are still very cash constrained with half the respondents anticipating a need to raise funds within the next six months, meaning around 350 companies of similar nature will be capital raising in the same period and therefore competition for investor capital will remain extremely tight,” Ms Stiles said.
In October, a number of juniors tapped investors for funds, including Flinders Mines which announced a $5 million capital raising it hoped to achieve through a discounted share offering.
The non-renounceable entitlement offer was extended to existing shareholders at a special price of 1.7 cents per share.
“The offer price is a discount of approximately 32 per cent to the 30-day volume weighted average price of Flinders shares on the ASX for the period ending 30 September 2016,” the company stated.
While commodity pricing and project selection largely influenced investor decisions, factors, such as a company’s approach to innovation, board diversity, and track record on delivering milestones also played a part.
“It’s important for juniors to take a balanced approach to innovation in order to attract investment,” Ms Stiles said.
“While investors don’t want to see high risks on unproven technologies, they are looking for increased adoption of technologies employed during exploration, combined with innovative approaches to project development and business model diversification.
“To stand out from the crowd and attract the investor dollar, look for opportunities to collaborate with suitable partners like the majors or mining service companies.”