Explorers September quarter: Batteries back on top as exploration momentum continues
Explorers September quarter: Batteries back on top as exploration momentum continues
The financial health of Australian-listed explorers continued to remain resilient, despite broader macroeconomic slowdown, data from BDO’s latest quarterly Explorers Report has revealed.
BDO’s Global Head of Natural Resources Sherif Andrawes said a healthy quarter of fundraising and an increase in exploration expenditure compared to the June 2023 quarter served as an indicator that the sector activity is still thriving.
“Funds continued to flow into the ground, evidenced by a 8 per cent growth in total exploration expenditure relative to the June 2023 quarter - an encouraging sign that activity persists despite prevailing economic uncertainty,” said Sherif.
“Cash balances generally remain healthy, indicating that the avenues for fundraising generally remain accessible, particularly for those possessing high-quality assets or sought after commodities like critical minerals, gold, or energy transition minerals.”
Significantly, the energy transition movement continued to build momentum, with lithium explorers securing a total of $430 million in capital.
The strong quarter for lithium explorers ended gold’s run of four consecutive quarters in first place, however Sherif said it’s a result consistent with forecasting.
“A total of 43 companies raised capital in excess of $10 million, dominated by lithium and gold explorers,” he said.
“There’s escalating demand for the raw materials utilised in electric vehicles and battery energy storage, which has also been driven by concerns surrounding global energy security.”
However, despite the proportion of explorers with cash balances more than $1 million remaining high relative to historical levels, factors like inflation are beginning to have an impact.
While the average cash balance of explorers has remained stable over the past three quarters, the percentage of companies with more than $1 million in cash decreased to 78 per cent from 82 per cent in the previous quarter.
This represents the lowest proportion of exploration companies and the first time this statistic has dipped below 80 per cent since the December 2020 quarter.
Despite persisting inflationary pressures, Sherif said explorers have, by and large, navigated the challenges successfully to date.
“The average cash balance per explorer remained relatively stable from the June 2023 quarter, experiencing a slight decrease from $10.11 million to $10.06 million in the current quarter.”
However, despite predominantly positive signals from this quarter’s data, there are inklings of potential sectoral fragmentation.
“Small players in the industry are contending with tightening cash balances and limited access to fundraising, whereas many larger players, particularly those engaged in high-demand commodities, uphold robust cash reserves, and encounter fewer challenges in securing funds.
“We anticipate that smaller players may navigate this by pursuing consolidations or forming strategic partnerships to advance their projects, which could give rise to heightened M&A activity in the coming quarters,” said Sherif.
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Tate Papworth
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E: tate.papworth@bdo.com.au
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