Resources sector better equipped to deal with virus crisis

The scars from the last downturn have left the resources sector relatively well-positioned to survive the coronavirus crisis, with balance sheets across the industry in a far stronger state than in other major downturns.

However, The Australian is reporting exploration and development companies relying on investors for fresh equity face months of pain as equity markets freeze for all but the best new projects.

Debt-loaded mining companies were left exposed during the global financial crisis, when the likes of Rio Tinto and OZ Minerals were pushed to the brink after gorging on debt to fund acquisitions. Andrew Forrest’s Fortescue Metals, meanwhile, faced a debt crisis in 2015 when iron ore prices tanked just as the miner’s borrowings peaked.

This time, however, the coronavirus outbreak has occurred when many of the nation’s biggest miners are carrying little to no debt. Miners have enjoyed solid commodity prices in the years leading up to the current crisis, especially in iron ore and gold, while management teams across the sector have kept a focus on keeping debt down.

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