Mining bond issues to hit record high in '09-E&Y
miningweekly.com
By: Reuters
3rd June 2009
Updated 1 hour 32 minutes ago
LONDON - Ernst & Young expects to see mining company's corporate bond issues reach a record high in 2009, but at a higher cost for companies, the firm's UK head of mining and metals said on Wednesday.
Lee Downham also said there would be a recovery in commodity prices in 2009, but that company valuations currently remained far from peak levels.
"Supply will be constrained and unable to meet demand in the medium to long term, resulting in a significant increase in commodity prices during the next upturn," he told the World Mining Investment Congress.
"Increasingly there appears to be light at the end of the tunnel for the mining & metals sector; fear for survival has largely eased, giving way to a desire to control costs and become fitter for a challenging period of global recovery."
At the same conference, Peter Archbold, director of corporates at Fitch, agreed that firms have been successful recently in raising money in the bond markets but said the current rosy situation may not last.
Michael Lynch-Bell, a partner at Ernst & Young, said the number of mining companies falling into administration in the second quarter had been fewer than expected and said most banks were "not prepared to pull the rug" out on financing.
Ernst & Young recently estimated that 29 percent of mining companies on AIM, the London Stock Exchange's junior market, have less than 1 million pounds ($1.66 million) cash.
Lynch-Bell told the conference he expected to see consolidation of some junior mining companies.
"A significant number of smaller companies will be folding into others," he said.
Lynch-Bell also said miners should look to hedge input costs, such as diesel, rather than hedging output. |
