BDO’s latest research into the financial health of Australian-listed explorers for the March quarter of 2021 provides positive signals for the sector, with evidence of a definitive COVID-19 recovery seen from unprecedented levels of financing inflows, a strong cash position and improved investment and exploration spending since early 2020.
Exploration companies raised $2.37 billion in the March 2021 quarter, up 7 per cent from the $2.21 billion in December. Of those companies, 48 raised funds of $10 million or more and made up 75 per cent of the total funds raised. Of those 48 companies, there were ten gold companies, nine lithium companies, four uranium companies, four rare earth metals companies, four graphite companies and the remaining 17 companies were across 14 different sectors, most notably copper-gold, copper and oil and gas. This resulted in 80 per cent of exploration companies reporting cash balances of $1 million or more, the highest proportion recorded since BDO commenced this analysis in 2013.
Whilst the total amount of funds raised during the quarter showed a slight increase, there is some evidence to suggest that the frequency of capital raises in the sector had slowed with 28 per cent of exploration companies raising $1 million or more, down from 39 per cent and 36 per cent in the September and December 2020 quarters respectively.
The first quarter of 2021 has proven to be a strong start to the year for Australian explorers, and is showing signs of a transition away from mere recovery to a new focus on ESG. The global push for lower carbon emissions and clean energy has put a spotlight on EV-related commodities and greener energy alternatives, which we are already seeing in the March quarter. Australian explorers will need to continue to place greater emphasis on demonstrating a mature approach to ESG matters in their operations to continue capitalising on this trend.