Junior minerals explorers in Australia facing pressures in raising fresh capital as the global credit crunch bites, have been warned to prepare themselves for potential takeovers by predatory Asian investors.
Addressing the first day of the 2008 Paydirt Asia Downunder Conference in Perth, DJ Carmichael's head of research, Paul Adams, said unlike previous cyclical downturns, there was now "nowhere to run" for small explorers if they could not access capital growth through equity markets.
Where once they could convert to a dot com and then back again when cycles improved, in the current global crisis, there is just no opportunity to morph into something else," Mr Adams said.
"The warning signs are already there. Recent rights issues by these juniors have been poorly taken up, there is growing risk aversion to any explorer in an area of geopolitical uncertainty, and funding activities for project development are being delayed if not curtailed altogether.
"There is an emerging disconnect between project value and share price and this makes it a very dangerous time for small Australian explorers with reasonable assets but thin balance sheet."
Mr Adams said these companies were becoming easy takeover targets and the most likely predators would be Asian sovereign wealth funds and aggressive funds.
"Australian explorers facing this scenario need to think about their defence strategies if a takeover is launched against them," Mr Adams said.
He also warned equities markets not to expect any quick resolution to the worsening US problems overnight - saying that since 1980, the average recovery duration of a true bear cycle was 137 weeks.
