Commodities firms suffer after grim year

Smaller companies across the commodities sectors are facing a difficult new year as capital remains hard to come by and prices show little sign of resurgence.

Ernst & Young's index of top 20 mining companies on the Alternative Investment Market (Aim) plummeted by 77 per cent over the course of the year, as March's record high was more than cancelled out by an all-time low in November. By the end of the year, Aim's miners were valued at just £3.8bn in total, just a quarter of the £15.7bn a year previously.

Dr Tim Williams, director of mining and metals at Ernst & Young, said: "AIM's junior exploration companies were hit particularly hard, as routes to capital became closed, and as share prices and market valuations were punished by the extreme market turbulence."

Where a year ago there were 197 small-cap miners, now there are just 181, and there were no new issues in the last six months of 2008. In terms of capital, just £973m was raised over the course of the year, compared with a record £2.4bn in 2007.

The result is companies going into survival mode. Expenditure is being drastically prioritised, exploration activity suspended, and costs sharply cut.

It is not just the miners that are suffering. Since July, Ernst & Young's index of Aim-listed oil and gas companies has also dropped by 60 per cent, compared with 7 per cent growth last year. In the last quarter in particular, funds raised all but ground to a halt. Just £20.5m was raised from secondary issues in October and November, compared with £150m in the same period in 2007. And the annual total was just £880m, a far cry from the £911m the year before.

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