London, 18 December 2009

Ernst & Young’s Mining Eye index gained 173% over 2009, a remarkable reversal of the dramatic decline that took place over the latter half of 2008. Reflecting the extent of devaluation that occurred during the market collapse of 2008, this is the largest annual rise by some distance since the index was established in 2004. However, the Mining Eye still remains 40% off its all-time high of March 2008.

2009 was a year of distress, followed by recovery and opportunity. The fear that took hold at the beginning of the year shaped the decisions and fortunes of AIM’s junior miners. Costs were cut to extreme levels, non-essential assets were disposed of, delistings reached peak levels - many in response to the difficult market conditions - and the challenge of raising capital looked set to signal the demise of many a junior miner. There have been no IPOs in the AIM mining sector since June 2008.

But by mid-year, the strength of recovery in metals and share prices surprised many and lifted optimism in, and more importantly, investor enthusiasm for, the sector. Secondary equity fundraising made a tentative recovery and revived mergers and acquisitions activity became the new reason for delistings. A total of £809m was raised in the sector (to end November, compared with £1.1b in 2008), accounting for 18% of all fundraising on AIM.

Tim Williams, director of mining and metals at Ernst & Young comments: “Those companies that survived the initial capital drought and had sufficient funds in their coffers to do so, re-focused on core operations – news flow became once again busy with updates of activity on the ground. But it was deal chatter that really dominated the latter half of the year. Some of AIM’s largest mining companies became targets for the major mining companies, while others became acquirers themselves – pursuing the ‘ideal’ marriage of the cash-rich with the resource-rich."

Over the course of 2009, four of the Mining Eye’s long-standing leading stars have moved on to brighter things, through graduations to the Main Market and through business combinations with their larger peers. The AIM mining universe closed 10 December 2009 with a value of £9.2b, a 120% increase on its value of £4.2b at the end of 2008. This represents a strong recovery, given the exit of some of the sector’s largest companies from the market.

Williams concludes: “We expect the consolidation story to continue in 2010. The consequence will be a changed, and continually changing, universe of mining companies on AIM. Consolidation will result in a shrinking but potentially stronger and fitter universe. The number of listed junior miners will continue to decline, at least until appetite for IPOs returns. The signals are positive: a healthy global pipeline of future new listings on the major mining exchanges; the move towards equity as an alternate and preferred source of finance to debt; and the prospect of strengthening industry fundamentals due to constrained supply.”

Ends --