BDO’s latest research into the financial health of Australian-listed explorers for the June quarter of 2022 indicates a notable turnaround from the March 2022 quarter, with growth posted across exploration expenditure and capital raising back to record levels.
At the start of 2022, it was suggested there would be a tightening of activity across the sector due to cost inflation, volatile commodity prices, tight labour markets and increased geopolitical risk. That expected tightening is yet to be seen – if it will be - with the June quarter delivering strong performance and breaking the record billion-dollar mark.
The spend in the sector increased 25% between the March and June quarters with the average exploration spend per company also increasing to a nine-year-high of $1.35 million.
Predictably, sector leaders included gold and oil and gas, which is consistent with historical periods where these commodities are traditionally the favourites during times of global economic uncertainty.
The June sector also saw an increase in the number of companies that raised funds of $10 million or more, from 44 in the March quarter to 61 this quarter. These 61 companies accounted for 77 per cent of total funds raised, with lithium flagged as a clear preference for investors, eclipsing other commodities in total funds raised by a substantial margin.
Synonymous with this trend, we have again witnessed the presence of other battery metals such as graphite, nickel and cobalt amongst the cohort. In the coming periods, we anticipate that the flurry of funds that have been put towards lithium and other battery minerals will start to translate more substantially into exploration expenditure as companies seek to accelerate their projects to address worldwide concerns around future supply.
We expect that inflationary pressures will impact exploration and salary costs, but it is still too early to predict how capital markets will react, given that Australian-listed explorers are well-placed to service the growing demand for battery minerals and other essential commodities.
Based on our analysis of the June quarter, the sector is alive and well and ready to meet the global demand for the minerals required to support the energy transition.