miningnews 30/03/04

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    New confidence among Australian juniors: KPMG


    Tuesday, March 30, 2004
    MORE Australian small to medium independent resource companies are spending a greater amount of their exploration funds away from Australia, and a large number are expected to seek to raise capital in the UK and North America over the next five years, according to KPMG.

    Of respondents to the recent "KPMG 2004 Equity Market Survey: Independent and Mid-Tier Resource Companies" which looks at issues confronting small to medium independents as they go about raising capital for their business, 65% said they would like to raise equity capital on the Alternative Investment Market of the London Stock Exchange within the next five years.

    "Given that less than 2% of respondents to the survey are dual listed on AIM, this represents a very significant trend in the way of thinking for small to medium independents in raising equity capital," Peter Dawson, KPMG associate director - corporate finance, said in a preview of the survey results at the APPEA Conference today in Canberra.

    "This is consistent with a greater trend among the respondents towards international investment by Australian small to medium independents. Five years ago approximately 25% of capital raised by small to medium independents was expended on foreign exploration while last year approximately 50% of capital raised by the same group was expended on foreign exploration," Dawson said.

    KPMG said this view was presented by survey respondents in light of the strong performance of the Australian equity markets where capital raised in the oil and gas sector for 2004 will be more than double the capital raised in the same sector for 2003.

    "It may simply be a recognition by the CEOs of these companies that there are preferred alternative sources of equity capital for non Australian exploration projects," Dawson said.

    "Although we have not seen this expressed as a collective opinion from any industry organisations, the survey result implies that the majority of CEOs for small to medium independents are like minded in their preparedness to seek equity capital offshore."

    "It is evident from the results of the survey that equity markets for small to medium independents are truly becoming global markets. The path to London could become well worn over the next few years."

    In another presentation at the conference, Brent Steedman, KPMG assurance partner and leader of KPMG's Oil and Gas Centre of Excellence looked at the impact of the proposed changes relating to the impending implementation of International Accounting Standards in relation to accounting for exploration costs and how these changes considerably impact small to medium independents.

    "There are significant changes occurring in the international arena on how a company should account for exploration expenditure, and one way or another, Australian oil and gas companies will be required to make changes," Steedman said.

    "As Australian companies cannot or will not be permitted to continue with existing practices, it is important that oil and gas executives be proactive in the debate, clearly analyse the opportunities and implications, and develop communication strategies on how to best manage the situation."

    National chairman of KPMG's Energy and Natural Resources Group, Alison Kitchen, confirmed that Australia's emerging and established companies in the oil and gas industry would face some of their biggest challenges to date.

    "Overall, how these critical issues are interpreted and managed by Australian small to medium independents will impact the perception of these companies' success in the Australian oil and gas industry," Kitchen said.

    The full results of the "KPMG 2004 Equity Market Survey: Independent and Mid-Tier Resource Companie" will be released in May.

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