Publication:

Explorer Quarterly Cash Update: June 2020

31 August 2020

BDO reported the quarter ended June 2020 revealed the cash position of ASX listed explorers increased by 60 per cent, with investors throwing the sector a lifeline.

The increase in the June 2020 financing cash inflows has offset the four-year low of $834 million observed in the March 2020 quarter, and demonstrates a 12 per cent increase from the $1.2 billion financing inflows recorded in the June 2019 quarter.

The latest cash update reported 28 companies raised funds of $10 million or more – an increase from 12 companies in the March 2020 quarter. Gold companies have reaped the benefits of the funding surge with 57 per cent of the capital raised funnelling into gold exploration.

The injection of cash did not translate to spending however, with expenditure continuing to decline across the quarter. Whilst there is generally a gap between raising and spending, coronavirus restrictions are most likely limiting explorers’ ability to spend.

In the absence of another disruption to financial markets, the favourable financing conditions are expected to continue in the sector into the next quarter. BDO anticipates a rise in the number of IPOs and capital raises from exploration companies and a continuation of the “two-speed” economy. We expect the gold industry to remain buoyant with funds also flowing to smaller exploration companies as opportunistic investors capitalise on the current high price environment.

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