Miners set to tap investors

SHAREHOLDERS in the recession-hit global mining industry will have to dig deep to help debt-laden companies recover and expand, a study to be published today will show.<br /><br />Miners struggling with huge deficits due to high borrowing in 2007/8 are likely to rely on equity fundraising as their major source of growth finance in the next few years, according to the Wall of Debt report from professional services firm Ernst &amp; Young.<br /><br />Debt has slashed companies&rsquo; ability to fund new projects and could cause higher commodity prices, the study will conclude.<br /><br />&ldquo;There is likely to be a return to equity financing for both acquisitions and new project development,&rdquo; Ernst &amp; Young mining and metal partner Lee Downham said. &ldquo;Given the difficulty in raising new debt and the pressure to pay down existing borrowing, equity raisings will become more prevalent.&rdquo;<br /><br />The financial crisis and the resulting commodity price collapse has dramatically affected the earnings prospects and investment capacity of the 63 listed mining and metal firms covered in the study, such as Xstrata, Rio Tinto, BHPBilliton and Anglo American, Ernst &amp; Young said.<br /><br />Long-term metal and mineral demand fundamentals remain robust, but supply is being cut back and there may be shortages.<br /><br />New bank debt has become difficult to find and corporate bonds are largely open only to&nbsp; creditworthy firms, resulting in a need for more innovative financing and merger and acquisition structures.<br /><br />This is likely to be reflected in fewer contested deals and a greater focus on savings, Downham said.<br />