Slowdown brings relief for juniors PDF Print E-mail
Monday, 26 November 2012 08:30

Three months ago Ventnor Resources managing director Bruce Maluish said you had to beg, borrow or steal to get a drill rig out on site.

Today, Ventnor, which is drilling at its flagship Thaduna project near Meekatharra, gets regular cold calls from drill operators looking for business.

It is a notion echoed by Kalgoorlie-Boulder based Phoenix Gold managing director Jon Price, who said the evidence came through the number of drill rigs sitting idle in the lots around the mining town.

"I can tell you, there are a lot more parked in the depots than there were a few months ago," he said.

Base metals, manganese and uranium explorer Encounter Resources managing director Will Robinson has seen the same trend.

"Clearly it is becoming much easier to get service providers, drill rigs and people - and that certainly helps with operations," he said.

For junior exploration companies with projects in WA, it is a welcome relief.

So often the whipping boys of the resources boom, today junior companies are reaping the benefits of the "trickle effect" coming through the recent slowing of expansion by bigger resources companies.

Exploration company chiefs said the labour market has improved significantly, with more experienced staff now on the lookout for work due to the heavy lay-offs by larger miners.

In addition, a bigger market for second-hand equipment such as accommodation dongas and operational kit has become more evident.

Veteran mining identity and Reed Resources chairman David Reed agreed that the labour market, along with the accessibility to service providers, had become a little bit easier over the past few months.

However, he described the scaling back by the big end of town as a double-edged sword.

"The big boys have stopped a lot of exploration, and you'll find the big companies are tightening up on their budgets," he said.

"This is not good for the industry in some ways, as normally the smaller companies hang off the small business which is handed out to the drillers by the bigger companies.

"It's worrying when the big companies scale back."

Yet Mr Reed, along with the vast majority of managing directors in the junior sector, said the trickle effect paled in comparison to the major issue facing WA exploration companies: the limp equity market.

"I was a broker for 40 years and raised a lot of money for the junior end of the market and I see it becoming near on impossible in this climate," Mr Reed said.

"People think: why wouldn't I just go and buy some bricks and mortar, why risk it?

"You can go through the paper and find 300 or 400 juniors, and out of those four of five might have a commercial discovery, so the odds aren't good. We need some form of attraction through Government-backed incentives."

Mr Reed said the State Government's $80 million Exploration Incentive Scheme, introduced in 2009, was one example which helped ease the financial pressure on small miners.

He said this initiative, which co-funds up to 50 per cent of drilling up to $200,000, had helped Reed's drilling programme at its Meekatharra gold project.

Association of Mining and Exploration Companies chief executive Simon Bennison said although the trickle effect was a welcome relief for junior miners, only those who were cashed up could take advantage of it.

He said the financial end of town was making life very difficult for the juniors who still needed working capital.

"Even though drill rigs might be more available, and the costs are less, and a workforce is available and the costs are less, the availability of finance still is a scarce entity," he said.

"Some cashed-up companies will be able to take advantage of this situation. but unfortunately for some nothing will change."

Minatour Exploration chairman Derek Carter went further.

He said the immediate reality was that some of the junior exploration sector was under severe threat of solvency issues.

This would lead to a mass of share purchase plans early next year, as boards looked for survival capital in the absence of appetite for equity placements, he said.

Encounter Resources' Will Robinson was a little more sanguine. "I think there's good reason to be optimistic going into next year, with the Chinese handover and the US election being out of the way now hopefully that creates a better market environment," he said.

"But it will be fascinating to see how things end up in March or February next year."



Related links:

Ventnor Resources

Phoenix Gold

Encounter Resources

Reed Resources

Minotaur Exploration


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