A CLUSTER of Australian resource companies are at risk of burning through their cash reserves by Christmas.
This could force them to consider selling assets or raising funds amid the most bearish market conditions in years.
Cash reserves across the Australian resources industry have halved over the past two years when measured as a percentage of total assets, highlighting the predicament of an industry that appears ripe for a round of rationalisation and consolidation.
Significant names in the resources space including Lynas Corporation, Paladin Energy, Gindalbie Metals and Alumina Limited will all face hard decisions about their finances within months if long-expected funding solutions and approvals do not pan out.
The concerns extend to a host of resources aspirants wanting to bring their first project into operation.
The likes of Toro Energy, Flinders Mines and Bannerman Resources have less than one year's cash on their books, based on recent spending.
With the health of balance sheets looming as a key theme during this month's reporting season, Macquarie Bank has published data showing that cash as a percentage of total assets in the resource sector has fallen from just under 12 per cent in 2010 to just over 6 per cent in 2012. Reasons for the predicaments of the companies mentioned above vary. They range from delays in government approvals, to currency fluctuations and slumps in commodity prices.
A community campaign against Lynas' rare-earths processing facility in Malaysia is central to its predicament, with the backlash delaying Lynas' temporary operating licence for the plant.
Lynas has been burning through just over $100 million a quarter over the past year, meaning the $205 million cash on hand would be gone by Christmas if that rate was sustained.
The company has recently been underspending on projects and administration to preserve cash until the licence is issued, and JPMorgan estimates it can withstand only another three or four months' delay before requiring additional funding.
The iron ore miner Gindalbie has been inconvenienced by the recent rise in the Australian dollar, which has effectively eroded the value of a $US1.2 billion ($A1.1 billion) loan granted by Chinese banks.
That currency fluctuation created a shortfall of about $200 million, which dwarfs the $40 million in cash the company held at June 30.
Gindalbie has ruled out an equity raising, saying it is in advanced talks with the same Chinese banks about extending the credit facility, and is confident it will be settled soon.
The uranium miner Paladin is in a more difficult position, with $125 million in bonds due to mature just seven months from now, and just $US96.9 million in cash at last report. Paladin had a $US120 million loss in the six months to December 2011, and with uranium prices recently slumping to a multi-year low, the company is discussing asset sales and other options to enable it to meet its debt obligations.
Alumina Limited is working in a depressed commodity sector, and may require more funding by mid-2013 if prices for alumina and aluminium stay where they are.
Flinders and Bannerman both wasted crucial time on takeover suitors whose offers failed to materialise, while Toro has little to show from a year of talks with potential joint venture partners for the uranium mine it is developing in Western Australia.