Explorer Quarterly Cash Update: December 2019

03 March 2020

BDO’s report on the financial health and cash position of Australian-listed explorers for the December 2019 quarter (based on quarterly Appendix 5B reports lodged with the Australian Securities Exchange (‘ASX’)) provides mixed signals for the exploration sector, with the highlights being the increase in financing inflows and the reversal of the decrease in net investment from the previous quarter.

Total financing cash inflows increased by 19% in the December quarter, contributing to a steady upwards trend over the course of 2019. This indicates a growing appetite for investment in ASXlisted exploration companies since the low levels of financing experienced by the sector at the end of 2018.

The increase in financing inflows has not corresponded to a significant increase in the cash position of explorers, which have held generally steady since the September quarter. Instead, the benefit from the increased financing has been more visibly reflected in the increase in net investing cash outflows of 71% in the December quarter. For example, West African Resources Limited (‘West African Resources’), which received a gross $94.5 million of borrowings and invested $66.6 million into the development of its Sanbrado Gold Project, which was the highest net investment outflow recorded in the quarter ended 31 December 2019. Also, interestingly, despite the decline in the number of exploration companies lodging Appendix 5B reports, total exploration spend is at its highest point since the September quarter of 2018.