An Association of Mining & Exploration Companies survey has found that 74 per cent of Australian mineral exploration companies have ceased, or dramatically decreased, their exploration operations due to the COVID-19 pandemic.
The respondent pool, consisting of 63 AMEC member companies, accounts for almost a fifth of Australia’s 364-strong mineral exploration sector. Three-quarters of these were Western Australian entities.
The survey covered a wide base of topics surrounding business operation, financial impact, and access to capital during and after the initial COVID-19 outbreak.
Strikingly, 74 per cent of companies did not think their cash reserves would last the calendar year, and 69 per cent did not consider it possible to raise capital in the next six months.
Prior to COVID-19, the past 18-24 months have been seen as a very flat investment environment for mineral exploration, with new capital being progressively harder to acquire. Without having the ability to easily raise capital, many exploration companies have been exhausting their cash reserves, with 26 per cent of respondents having cash reserves of less than $1 million, and 15 per cent having less than $500,000, according to the report.
In response to the survey results, AMEC chief executive Warren Pearce has called for the federal government to extend JobKeeper assistance to the industry.
“Explorers are being dealt an added blow, with mineral exploration companies being excluded from the JobKeeper Initiative because of the definition used in the eligibility criteria,” Mr Pearce said.
“Without greater cost relief or financial assistance, there will be dire consequences for the exploration industry in Australia, and for the ability of Australia’s mining industry to identify and develop new major projects ready for investment to support Australia’s economic recovery.”
With mining royalties key in providing income for state and federal treasuries, a galvanised and secure mineral exploration industry is financially and strategically prudent.
According to the survey, as of April 17, around 25 per cent of companies had actual or planned redundancies with most exploration companies currently employing somewhere between two and 10 people.
Of the responses, 51 per cent thought it would be at least seven to 12 months before capital raising was possible. A further 18 per cent thought it would be over a year until investment community receptivity improved.