Report shows explorers enjoying purple patch

The Australian mineral exploration sector is in a state of rude health with expenditure hitting fresh seven-year highs as a wave of new funds pour in, according to a report by consulting and advisory firm BDO.

The report shows total exploration spending hit $877 million in the recent September quarter, representing a 32 per cent jump on the June quarter.

Meanwhile explorers pocketed a total of $2.55 billion in new funds, on par with the $2.54b in the June quarter.

The inflows mean 88 per cent of explorers reported having cash balances above $1m.

The number of explorers lodging quarterly activities reports for the quarter grew by 62 to 704 compared with the previous corresponding period, mainly because of a growth in IPOs.

BDO’s Global Head of Natural Resources Sherif Andrawes said with the increased number of new entrants over recent periods, the exploration sector was showing no signs of slowing.

“With exploration spending peaking to this seven-year high, 56 per cent of companies recorded net investing outflows, which is 13 per cent higher than the two-year average,” he said.

Battery mineral companies were a prominent group this September quarter, particularly with respect to the uptick in investment and financing.

“The rise of battery minerals is clearly linked to the global trends of rising electric vehicle adoption and lower carbon emission targets which is a key consideration of the market,” Mr Andrawes said.

“It is essential that all exploration companies, regardless of commodity exposure, constantly consider the relevance of ESG to their ongoing operations and also to any investment decisions and future strategies.

“The ones who are able to do so successfully will likely continue to be supported by investors and contribute to the push for a cleaner and greener economy.”

BDO said it expected that the growth in exploration activity would continue in light of continual strong cash balances and the higher number of listed exploration companies.

However it noted that the growth might continue to be constrained by the availability of resources, travel restrictions and a shortage of skilled labour.