Who will survive? Commodities collapse will take a mighty toll.

In times like these only the fittest mining companies will survive. The current shakeout will likely see many weaker companies go to the wall.

LONDON -

A figure being put about by serious market analysts is that as much as 50 percent of the large number of junior miners and explorers may not survive the next 12 months as cash runs out and there is little prospect of raising money by other means. Decimated equity prices are so low this is not a route which gives much serious prospect of cash generation, and with the banks even fearful of lending to each other, what hope do junior miners have of finding a friendly financier to prop them up though a credit crunch of indeterminate length?

Ironically it may well be a time difference of only a few weeks earlier in the year which will have guaranteed survival for a number of companies - in other words for those who generated new finance while the markets were hot and before the money floodgates slammed shut. Once the downturn began it hit with unprecedented speed and depth leaving companies floundering in its wake and those who justifiably might have looked at making their fortunes on high quality projects are now just struggling to stay alive and/or ward off those predators with cash and an eye for a real bargain.

Even the majors are starting to suffer from cash deprivation. Xstrata pulled its bid for Lonmin apparently on cash raising problems - although this could be a bad example as the canny mining major may just have assessed that it might be able to pick up the world's No. 3 platinum miner in a year's time at a substantial discount to its £33 a share proposed offer as pgm prices continue to plummet.

The latest major deal to hit the buffers is Vedanta subsidiary, Sterlite's proposed offer for former U.S. copper giant Asarco which is itself struggling to get itself out of bankruptcy. Markets must be having an impact too on the continuing due diligence under way over BHP Billiton's proposed bid for Rio Tinto, although this is not a cash offer. But what does have to be taken into account here is that anti-trust issues may require a combined BHP/Rio company to divest itself of certain key assets and there is no guarantee of a decent price being able to be achieved for these. Rio itself appears to have ceased its proposed asset sale programme to reduce its debt after its Alcan takeover which is an ominous sign of things to come.

But with the majors it probably is not a question of absolute survival. They have the financial strength to pull through and ultimately benefit strongly. With the juniors it very definitely is likely to be, in many cases, a futile fight to stay afloat. The scale of the carnage will depend on how long the loss of confidence in markets persists, but there is currently no end in sight. Capital projects will have to be put on hold and with metal prices diving those projects which may have looked supremely profitable only six months ago may just no longer be so at current price levels. Even bulk mineral stocks which seemed to have bucked the trend are beginning to suffer on world markets.

The gold price, though, has been holding up as a store of value pretty well in comparison with other sectors - although here again the junior gold mining sector stock prices have been decimated - and the credit crunch will be leading to delays and postponements in new project fulfilment.

The big problem for analysts and miners alike is that we are now in virtually uncharted territory. Probably the nearest the world has seen has been the 1929 crash. The loss in confidence in the markets and in governments' abilities to control the devastation is putting the markets under huge pressures and no-one is quite sure where things will end.

At an ICMM reception in London yesterday evening, Richard Adkerson, CEO of Freeport McMoran, and the new Chairman of the International Council for Mining and Metals after Brad Mills of Lonmin stepped down, acknowledged as much, but also told Mineweb that the industry will cope with the problems as it has with other major eventualities in the past. Indeed the slump in prices may well offer spectacular opportunities for those with powerful balance sheets. Adkerson said at the event that he had spoken with a number of leaders of other top mining companies and all express confidence in the industry's future as he did himself. (He also said he read Mineweb articles virtually every day!!)

But while the market crash may provide opportunities for the strong it is very much the Darwinian theory of survival of the fittest which will prevail. The industry has seen crashes before which have also resulted in huge contractions in the numbers of junior miners. But it always recovers. The world cannot do without mined minerals. There are going to be great opportunities out there for the strong and the brave.