Lacklustre performance by AIM’s miners in first quarter of the year

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London, 14 May 2012: Aim’s junior miners had a subdued start to the year, with strengthening metals prices contributing to only a 5% gain in EY’s Mining Eye index from the previous quarter, underperforming the rest of the market.

However this lacklustre performance was offset by an increase in listings with five new mining companies joining the market, three of which were IPOs.
Aim’s junior miners trailing industry competitors

David Russell, a Director in EY’s mining and metals team, said: “Global economic and geopolitical volatility have taken their toll on the shares of Aim’s junior miners. Although an uplift in metals prices kept the Mining Eye index in positive figures, it was left trailing the oil and gas, retail and automotive sectors which all made significant gains.

“However compared to Q4 2011, when there were no new listings, five admissions in the last three months are a really encouraging indication that we could begin to see a revival in the market in the second half of the year. Although this remains a major ‘if’.”

But banks and strategic partners are loosening the purse strings

There was also good news for equity financing, which increased in both volume and value. According to EY’s Mining Eye Index, equity financing in the first quarter of the year reached £251m, up 63% from the previous three months and the largest quarterly amount since Q2 2011. Over 75% of the proceeds were raised by just six companies.

David commented: “Aim’s miners are drawing on a range of financing options, from both equity and debt funded partnerships. In the last three months alone, we have seen evidence of banks and strategic partners, such as offtake customers, lending to the sector and this is a trend we expect to continue. Strategic partners will continue to seek opportunities to secure supply or control over raw materials, whilst banks are focussed on finding ‘good fit’ projects with experienced management teams.

“The sheer breadth of investors shows that capital is still available for the right projects and for companies that are prepared to be innovative.”

Volatility and risk aversion will continue to dominate

Concluding David says: “Despite the relatively flat performance of the index this quarter, volatility and risk aversion are likely to be the dominant themes for Aim’s miners in the months ahead. Companies need to be prepared and able to react quickly and decisively as windows of funding opportunities open and close.”

Mining eye - Quarter 1 2012 966K, May 2012