Explorer Quarterly Cash Update: December 2022

BDO’s report on the financial health and cash position of Australian-listed explorers for the December quarter of 2022 suggests that explorers remain in good stead, with financing inflows bouncing back from a short-term lull last quarter. Further, investment and exploration spending remained at some of the highest levels we have seen since the commencement of our analysis in June 2013.

51 companies (which we have termed ‘Fund Finders’) raised funds of $10 million or more and made up 76% of the total funds raised. Gold explorers raised the most funds for the second consecutive quarter as growing inflation, geopolitical uncertainty and market volatility continued to drive demand. Lithium Fund Finders proved once again their ability to attract funding, being the leading commodity for fund raisings for the second consecutive year.

We saw an 8% decline from the record $1.04 billion and $1.07 billion spends in the June and September quarters respectively, for exploration expenditure. However, at $993 million, this still remained at some of the highest levels observed since 2013. Given our Fund Finder analysis by commodity, unsurprisingly, the largest exploration spends were among oil and gas, gold and lithium explorers.

Net investment cash outflows increased by 21% to $1.04 billion for the December 2022 quarter, which is the highest net investing cash outflow recorded since the start of our analysis. This was driven by the larger end of the market, comprising investment spends in excess of $750k. This is amidst a general trend since September 2021 of a declining number of explorers recording net investment outflows, which we consider to be attributable to cash preservation efforts amongst broader market uncertainty.

Throughout the quarter, we saw the tumultuous mix of economic and geopolitical uncertainty reveal the true extent of the global need for resources and, importantly, underscore the need for their secure and sustainable supply. Our analysis shows that compared to historical levels, exploration companies in general are well funded, which places the mining sector in a better position to meet the future metal demand arising from the energy transition. 

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