September quarter: Total exploration spending hits A$877m, 88% of explorers report cash balances above A$1m

07 December 2021

Latest research from business advisory firm BDO shows total exploration spending hit A$877 million, representing a 32% increase from what was already a seven-year high in the June 2021 quarter.

The total exploration expenditure in the quarter of $877 million matches the levels of quarterly expenditure seen in 2013 and 2014.

Amidst the higher level of spending over the September quarter, the number of companies lodging Appendix 5Bs broke the 700 mark, reaching a total of 704 companies with IPOs continuing to be the main driver. This number is 62 more than the September quarter in 2020.

“With the increased number of new entrants over recent periods, the exploration sector is showing no signs of slowing,” said Sherif Andrawes, BDO’s Global Head of Natural Resources.

“Exploration has again seen record-breaking level of funds in the September 2021 quarter, with explorers pocketing a total of $2.55 billion in funds, on par with the $2.54 billion in the June quarter.”

Amidst the higher level of spending over the September quarter, cash balances continued to strengthen with 88% of explorers reporting cash balances of more than $1 million.

“With exploration spending peaking to this seven-year high, 56% of companies recorded net investing outflows, which is 13% higher than the two-year average.”

Battery mineral companies were a prominent group this September quarter, particularly with respect to the uptick in investment and financing.

“The rise of battery minerals is clearly linked to the global trends of rising electric vehicle adoption and lower carbon emission targets which is a key consideration of the market.”

The report highlights how governments, corporations and investors are placing greater emphasis on the energy transition away from emitting fossil fuels.

“It is essential that all exploration companies, regardless of commodity exposure, constantly consider the relevance of ESG to their ongoing operations and also to any investment decisions and future strategies,” noted Sherif. “The ones who are able to do so successfully will likely continue to be supported by investors and contribute to the push for a cleaner and greener economy.”

BDO expects that the growth in exploration activity will continue in light of continual strong cash balances and the higher number of listed exploration companies, but notes that this growth may continue to be constrained by the availability of resources, travel restrictions and a shortage of skilled labour.

View the September quarter Explorers Quarterly Cash Update.