The Fraser Institute Annual Survey of Mining Companies, released yesterday, and Ernst & Young's report on Canadian miners, released today, both point to an industry struggling to maintain its footing. Yet despite predicting major hardships ahead, they both offer glimmers of hope.

Ernst & Young's study is most notable for the big numbers -- the consultancy calculated that 92 of the top 100 mining companies on the Toronto Stock Exchange watched their market value go down between July, 2008, and January, 2009. And more than half of those companies lost more than 50% of their value in that time. That left 23 companies with market caps of $1-billon or more, compared with 42 last year.

More troubling is the state of their balance sheets, as 28 of the top 100 have less than $25-million of cash, according to the study. "It paints the picture of why companies are doing their best [just] to survive," said Tom Whelan, head of Ernst's national mining practice.

But Mr. Whelan also noted he is impressed with how quickly mining companies rushed to cut spending and preserve cash once the global economic crisis struck in the fall. In the future, he said they should try to ensure there are no other "hidden surprises" that could hurt them, such as potential financial troubles with their suppliers.

"The one [area] where companies have not done as robust a job as they could is taking a look at their working capital, and how they manage it. There are significant opportunities to free up cash there," Mr. Whelan added.

The Fraser Institute's study offered a gloomy outlook for the junior-exploration sector: Four out of five mining executives interviewed predicted that at least 30% of those companies will go out of business. And about 40% of the people interviewed said that more than half of the juniors would disappear as financing for exploration becomes almost impossible to get.

"Most miners expect commodity prices will take off again. But banks and investors are not looking for anything that bears risk these days," said Fred McMahon, co-ordinator of the study.

On the positive side, he found evidence that political risk for mining companies might be moderating. When commodity prices were rising, governments constantly pushed miners for a bigger piece of the pie. But now that prices are down and companies are cutting back spending, those pressures may be easing.

The Fraser Institute's annual study ranks jurisdictions around the world based on their friendliness toward mining, and Quebec finished first for the second straight year. Seven of the top 10 jurisdictions were in Canada.

The bottom 10 includes luminaries such as Venezuela, Zimbabwe, Kyrgyzstan and the Democratic Republic of Congo.

pkoven@nationalpost.comPeter Koven, Financial Post