What disclosures reveal about resilience and risk

Key highlights

• Approximately 63% of all entities with a going concern note regarding a material ongoing uncertainty or some uncertainty which has been mitigated somewhat are in the energy and materials sector.
• Over 65% of all material going concern uncertainties on the ASX are concentrated in the resources and energy sectors.
• Small and mid-cap companies are bearing the brunt of capital raising challenges.
• Increasing regulatory red tape and ESG pressures are driving investment offshore.
• Lack of policy incentives and slow government processes are weakening sector resilience.
• Market consolidation and risk repricing are on the horizon.

The ASX's struggling core: Resources and energy

A deep dive into RSM’s audit and assurance data reveals a clear and concerning trend: ASX-listed companies in the materials (resources) and energy sectors are facing going concern pressures at significantly higher rates than the broader market. These sectors represent approximately half of the ASX index. We found that the percentage of entities in this sector with a going concern matter, that required a form of note to be issued in the accounts, was at a rate of 68%. This compared with the rest of the market where only 37% of entities had a similar note on going concern. By inference then energy and materials sector entities are twice as likely to have going concern related issues than the rest of a market as a whole.

The table below summarises the total number of going concern notes across sectors:

The comparison chart below brings that story into sharp relief:

This is a critical insight: these disclosures point to an uncertainty around a company’s
ability to continue trading for at least 12 months after the signing of the audit report.

A growing number of resource and energy companies are struggling to secure capital and stay afloat, particularly at the junior and mid-cap end of the market.

The capital crunch for small and mid-caps

Our analysis shows a strong link between company size and resilience. Companies with market caps over $10 billion, think the BHPs of the world—face virtually no going concern risks. But in the sub-$500 million bracket, the story shifts dramatically: these companies are far more likely to be flagged with material uncertainties and/or a note disclosure on a going concern risk that investors need consider.

Why? These smaller players typically operate without revenue or with limited cash flow. They’re exploring, developing, or proving up assets, and their lifeline is capital raising. In today’s climate of elevated interest rates, global uncertainty and ESG scrutiny, that lifeline is thinning.

Regulation and red tape: A growing barrier

Across boardrooms and audit committees, the same frustrations echo: regulation in Australia is slowing the sector down. Delays in permitting, overly complex environmental approvals, and a lack of clear policy direction are pushing investors and operators to look offshore.

"It's just too hard," is the common refrain. Many directors report faster ROI and fewer regulatory obstacles in overseas jurisdictions. And while most fully support ESG
objectives, they’re struggling with the practical realities of meeting compliance burdens while getting projects off the ground.

A sector essential to the green transition

Ironically, the very sector under pressure is essential to building a greener future. Wind turbines, batteries, electric vehicles all depend on critical minerals sourced from the ground. Yet Australia’s capacity to supply them is being hampered by policy friction, misaligned incentives, and a lack of urgency.

As global powers like the US push forward aggressively with critical mineral strategies and subsidies, Australia risks missing the moment.

What investors and lenders should watch for

For those looking to assess risk in this space, going concern disclosures are a crucial signal. Material uncertainty notes in audit reports are a red flag for liquidity and funding risk. Other key indicators include:

• Cash burn rate versus runway
• Lack of definitive offtake agreements
• Regulatory delays or stalled project timelines
• Frequent capital raises or share dilution

These signals suggest underlying fragility and, conversely, potential upside for those with higher risk tolerance.

Will the sector consolidate?

The current pressure is already reshaping the landscape. Large players are selectively acquiring promising juniors that have navigated the initial red tape or secured strategic assets. But without stronger policy frameworks and incentives for early-stage investment, fewer of these juniors may survive long enough to be acquired.

A path forward: Policy and perception

To restore confidence and unlock sector potential, governments may need to reframe their approach. Instead of viewing mining as a problem to be managed, it must be recognised as a partner in the clean energy transition. Incentives and policy clarity could help bridge the gap between ambition and execution.

Final thoughts: Passion, pressure and possibility

As someone who has worked across many industries, I can confidently say this sector is driven by passion. The people on the ground, particularly in small- and mid-cap companies, genuinely believe in what they do. They’re digging deep (literally and figuratively) to help power Australia’s future.

At RSM, we work closely with clients across the resources and energy sector, helping them navigate audit complexities, regulatory risk, and strategic decision-making. If your organisation is facing similar pressures, our experienced team is here to support you.

FOR MORE INFORMATION

If you would like to learn more about the topics discussed in this article, please contact Jason Croall