BDO’s latest research provides positive signals for the exploration sector, revealing the cash position of ASX listed explorers is the strongest since June 2013 (when BDO first commenced this analysis).
Access to funding peaked to a two-year high, with total financing inflows reaching $2.02 billion in the September quarter – a 51% increase from the June report. These figures signify a dramatic 142% surge since the four-year low of $834 million recorded in March this year.
The number of companies raising funds of $10 million or more (Fund Finders) increased from 28 companies in the June quarter to 46 companies this quarter, exceeding the 2-year average prior to June 2020 quarter of 24 companies.
Exploration companies are yet to pull the trigger on spending with growth in the sector not translating into expenditure. Anecdotally, this was due to prevailing economic uncertainty, travel restrictions and limited supply of drilling and other exploration support services in the sector.
The report states that 95% of funds raised were through equity raisings and only 5% through debt, with the average generally being a percentage split of around 70% and 30%. Gold continued to dominate the category, with oil and gas appearing to have fallen out of favour with only 3% of funds raised.
Significantly, the growing level of Initial Public Offering (IPO) activity in the sector, reflective of BDO’s own pipeline, was a key highlight of the quarter with an expected increase in activity over the coming year. Appendix 5Bs in the September quarter decreased from 646 companies in the June quarter to 642 companies this quarter, however this did not reflect the 17 companies which had not lodged Appendix 5Bs because they had either recently completed an IPO or are about to complete an IPO as an ASX upcoming float.
With an unprecedented cash position, the September quarter can be considered a hallmark for the exploration sector. The data in the September 2020, Explorer Quarterly Cash Update, clearly demonstrates there is money to be raised and explorers know it.
Download the full Explorer Quarterly Cash Update below:
Explorer Quarterly Cash Update September 2020