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Australia’s mining sector is a less attractive destination for financiers, with concerns mounting over the health of junior mining companies.

A series of reports released over the past week have helped to crystalize and quantify what is palpable in conversations with almost anyone involved in the minerals sector in the resource-rich nation: the mood is low, the deal-flow is falling and people are now second-guessing their investments in what was, until very recently, considered one of mining’s safe havens.

The Fraser Institute – a conservative Canadian think-tank – has just released its annual survey of mining companies. The report ranks the 122 mining jurisdictions in the world in order of attractiveness.

Last year, the poll was topped by Western Australia – home to some of the world’s most vast copper and iron ore facilities. WA has fallen to fifth in the rankings and is now the only Australian territory in the top 10. Only two of Australia’s seven states fared better in the rankings over 12 months, with concerns around over-capacity, governmental instability, regulatory uncertainty and falling demand placing huge question marks over mining’s health.

Commodity prices continue to be low, and while analysts are generally predicting an uptick, the past 12 months have hammered home the volatility of the sector and its overdependence on the fortunes of China.

Speaking to GTR in his Sydney office this week, Norton Rose Fulbright banking and projects lawyer Chris Redden says: “Lower commodity prices are affecting current demand for project development and financing in Australia, and deal flow is definitely down as a consequence. If prices soften any more or remain at current levels for some time, this may make life even more difficult for the junior mining sector in Australia. The juniors are less able than some of the major players to keep their production costs low and, on top of that, the equity markets remain closed to most of those companies, so raising capital continues to be extremely tough. We have also seen a lot of media discussion about whether some of the mines in Australia are still economic and a general reduction in new investment.”

Redden’s concerns over junior mining companies were confirmed in a report released by accountancy firm Deloitte, which outlined the extent to which they are stuck between a rock and a hard place. Juniors are simultaneously trying to deal with the blow of falling prices, while trying to court new investment in their facilities as the well has run dry.

“With mining’s total return to shareholders still underperforming, other sectors’ companies are under mounting pressure to boost short-term profits; in some ways this is impelling miners to ignore current investments that may deliver longer-term upside in favour of dodging investor ire by remaining cash positive,” the report read.

In a release to accompany the report, the firm’s financial advisory partner Nicholas Harwood says: “Falling iron ore prices and the dwindling pipeline of new projects are well-documented. They are impacting miners in terms of profitability and market capitalisation, and these impacts are, not surprisingly, also being felt by those in the mining services sector.”

While the problem is not indigenous to Australia, it is here where it is arguably most amplified. The Australian government has been accused of failing to nurture diversity in an economy which has been tilting towards the extractive industries for many years now. Failing to predict the downturn has proven very costly.

A third damning report arrived this week from SNL Metals and Mining showing the huge falloff in investment in non-ferrous metals exploration after the fall in commodity prices. While non-ferrous metals do not include Australia’s dominant iron ore sector, they do include the important minerals of copper, lead, nickel, tin and aluminium.

The report shows a 26% decline in exploration activity in 2014, while the Mining Australia journal reports that this figure can be neatly extrapolated to apply to Australia’s non-ferrous sector too, with Queensland being hit particularly hard.

Compared with two years ago, the report’s reading looks even bleaker. In 2012, there was a record US$21.5bn spent on non-ferrous exploration, with that figure falling to just US$11.4bn last year.