Despite tough market conditions, junior gold companies have a bright future, advisory firm Grant Thornton’s 2015 junior mining and exploration (Jumex) companies survey has found.

Following the last year of volatile and declining commodity prices, gold juniors have emerged with brighter prospects, with some 63% of the mining executives surveyed seeing the greatest opportunities for gold over the next year, followed by copper, zinc and nickel.

“This will be a welcome ray of hope for a significant portion of junior miners, given the extremely challenging conditions that persist in the sector. While there are companies who are achieving success – mainly in developing projects – the vast majority of junior miners are facing ongoing cash constraints, continuing falls in share prices, volatile commodity prices and disgruntled shareholders, which are all taking their toll,” says Grant Thornton Australia national head of energy and resources Holly Stiles.

She points out that the number of companies surviving on very low cash balances is increasing, with 29% of companies having less than A$500 000 in cash.

“At such low cash levels, the opportunities for management to develop projects and add value are very limited and survival is a key priority. Some companies may be able to ride out another year or two with minimal expenditure; however, for those with slim cash reserves and smaller hopes of a successful future fundraising (nearly two-thirds of respondents see no sign of improvements in investor interest in Jumex companies this financial year), the time may have arrived to make some hard decisions.”

She adds that one positive aspect of the ongoing market conditions is a growing level of collaboration across the broader industry, particularly between miners and services companies, as industry participants look for ways to do things creatively.

Mining services companies are feeling the knock-on effects of reduced spending by juniors, in addition to being hit by extreme pressure to improve productivity as the majors cut costs. The best outcome for the industry, says Stiles, is for all participants to find ways to do business differently for mutual benefit.

“To grow value in an extended period of market downturn, it is imperative that junior miners maximise every cent of expenditure and be ever more creative in structuring solutions to fund and develop their projects. I believe that increased collaboration between industry participants can only be good for the sector as a whole,” says Stiles.

This innovation also has to extend to capital raising, she says, noting that competition for capital is extreme, with 50% of junior miners planning a fund raising within six months.

As pressure continues to grow, increasing numbers of juniors are looking overseas for investment. However, with investor interest in mining constrained across the globe, expectations are that there will unfortunately be an increased number of business failures, consolidations and exits from the sector through backdoor listings.

“With capital constraints tighter than ever, junior mining executives need to innovate to find solutions to progress their projects. There are a range of new and interesting technologies that can assist and we encourage Jumex executives to explore a variety of options and embrace technology that may assist in adding value in a cost-effective way,” says Stiles.

The survey also reveals a growing trend for junior miners to refocus on Australia for future project opportunities, with 89% of respondents considering acquisitions having Australia on their shortlist, with Africa the next most popular jurisdiction.

“Following a trend over recent years to look overseas for new opportunities, the refocus locally is positive for the Australian industry as a whole,” she adds.

The Association of Mining & Exploration Companies (Amec) notes that Australia is also proving to be relatively attractive for investment, with 74% of respondents to the Jumex survey having received an approach or conducted a transaction with overseas investors.

“This needs to translate into increased investment in mineral exploration which is at its lowest levels in the past ten years. The rate of discovery is not keeping pace with the rate of depletion of existing mines, which is extremely worrying for the future of the industry and government revenue streams,” Amec CEO Simon Bennison said last week.