Explorer Quarterly Cash Update: March 2019
11 June 2019
BDO’s report on the cash position of Australian-listed explorers for the March 2019 quarter (based on quarterly Appendix 5B reports lodged with the Australian Securities Exchange (‘ASX’)) provides mixed signals for the exploration sector with the highlight being the increase in financing inflows, which reversed the decline in financing inflows that had occurred since the June quarter of 2018.
A total of 680 Appendix 5B reports were lodged during the March 2019 quarter, down from 693 in the December quarter. Notably, during the March quarter, two new exploration companies were admitted to the ASX through an initial public offering (‘IPO’) and as at the last trading day of the March quarter (Friday 29th), both companies were trading at or above their issue prices. Despite the strong rally experienced by the Australian resources sector in the March quarter, explorers still appear to be finding conditions tough. While financing inflows increased to $908 million in the March quarter, this was well below the two year average of $1.34 billion. On a positive note, the increase in total net investment indicates that explorers with capital were more willing to invest their cash compared to the December quarter.
Overall, the Australian resources sector performed strongly in the March quarter, as evidenced by the S&P/ASX 200 Resources Index which increased by 19% during the quarter. This increase can be attributed to a number of factors including a temporary easing of fears over the China and US trade dispute and the more subdued approach by major central banks to interest rate changes.