Miners Must "Act Now" to Survive Finanicial Crisis Says Expert

Cash-strapped miners "must act immediately" to raise funds to survive the current global economic crisis, financial mining experts warned today.

Speaking at the Mines and Money conference in London, a panel of industry experts detailed how the fall in commodities and a lack of available finances will affect both senior and junior miners.

According to head of mining at Ernst & Young, Michael Lynch-Bell, 2008 has seen a slowdown in mining deals, with global commodity prices falling disproportionally in July.

While Lynch-Bell pointed out that seniors are more "risk aware", he warned that some juniors face going into administration due to distressed investment funds.

"The companies that have cash must work at minimum levels while those which do not must act immediately to raise funds through innovative means," Lynch-Bell said.

According to analyst at RBS Capital Markets, Des Kilea, juniors could form joint ventures with seniors, offtake agreements or seek funds from alternative sources such as private equity.

Kilea outlined a number of ventures including Petra Diamonds and Kopane, which have both successfully hit targets and moved projects forward using private equity from the Middle East.

China’s dominant role

According to MD of mining at Société Générale, Judith Mosely, one of the biggest problems to hit the industry this year has been the "demise of Chinese investment" as the country shifts its focus on domestic investment.

Mosely does, however, believe China offers "big opportunities" from a financial and mining perspective.

Lynch-Bell added that China’s impact on metals demand must "now be the focus", while Kilea said that China’s growth boom can no longer "cushion the blow" by providing capital to the mining industry.

Reflecting on 2008, Mosely said strategic investment was still being made and there are lots of ways companies can raise funds. "We shouldn’t be too distraught," she said.

By Ozge Ibrahim