No cash for miners but commodities enjoy a run

THE BOURSE WHISPERER: In a recent report, resource industry observers Austex Mining indicated there is still some concerns for the market with a lack of cash being a hindrance to new exploration and project development.

According to the report the overall cash position of the 836 resource companies currently listed on the Australian Securities Exchange fell nine per cent to $4917 million.

Ninety per cent of all the cash is held by 29 per cent of the companies, which means 71 per cent the companies are sharing only 10 per cent of the total.

Of concern is 376 companies have less than $1 million cash, even more worrying is 140 hold less than $200,000.

Based on the March Quarter Operations Cash Flow, 25 per cent, or 209, of these companies, don’t have enough cash to operate for one quarter.

However, Australian resources companies are, by nature, and if you will pardon the pun, resourceful.

The report detailed that during the last quarter, 213 companies raised cash through a Share Placement.

That sounds good, but only 91 were able to raise more than $ 1million while 30 companies raised less than $100,000 through other means, 111 companies received cash by way of either loans or converting notes, and 85 companies at the Exploration Stage received cash as a Loan.

Being in operation hasn’t guaranteed any fun on the balance sheet for many companies either with only 96 boasting operations revenue from production in excess of $125,000 ($0.5 million per annum).

Production cash flows (C1 Margins), expenditure on new project development, and exploration expenditure were all down on the previous quarter.

Production cash flows (C1 Margins) totalled $223 million – down 26 per cent, expenditure on new project development was $361 million – down 23 per cent, and exploration expenditure was $565 million – down 15 per cent.

Only 488 companies spent more than $125,000 on exploration.

Austex classes companies spending less than $125,000 per quarter in total on production, development or exploration.

There are currently 296 companies (35 per cent) falling into that classification.

The biggest question raised by the report is why 363 companies spend more on administration costs than they do on production, development or exploration?

Despite the gloomy nature of the Austex report there are other avenues to good news.

A recent Deloitte WA Index report indicated there was some enjoyment as commodity prices fluctuated.

“Local businesses have much to stay jubilant about, with signs of recovering overseas markets and positive WA projections,” Deloitte clients & markets partner for Western Australia Tim Richards said.

Nickel enjoyed its highest price in 15 months with a 15.4 per cent increase.

This came amid supply concerns from Russia’s intervention in Ukraine, while Indonesia continued its ore export ban.

According to the Deloitte report, Russia and Indonesia combined supply a quarter of the world’s nickel, fuelling concerns about reduced global supply.

In the world of precious metals Palladium led continued upward growth from the previous month, posting gains of 3.2 per cent over April.

“South Africa, the world’s second largest supplier of palladium is experiencing supply disruptions, driving the metal’s price up,” Deloitte said.

“The country’s production has been affected by labour disputes since January shutting down key mines and adding to the most protracted shortfalls in global production since 2005.”

As far as gold and silver went Deloitte said signs of a continued recovery in the United States poured water on any potential increases prices as the tensions in Ukraine again reared their head, with silver falling by 3.5 per cent due to oversupply and weak demand.

Deloitte explained a fall of 11.4 per cent in uranium prices was also due to excess supply as well as discretionary demand after the world’s third largest uranium producer, Cameco Corporation, announced it did not expect demand improvement in the near to medium term.

China was to blame for iron ore prices coming off to the tune of 6.1 per cent as the country decided to get tougher on loans for iron ore imports due to concerns that steel mills are using import loans to stay afloat in defiance of policies to reduce overcapacity in heavily polluting and loss making industries.