Junior miners hit paydirt, raising $2.37bn in March quarter, says BDO
Australia’s exploration juniors will be cashed up for years after raising a huge $2.37bn in the March quarter.
Australia’s exploration juniors will be cashed up for years after raising a huge $2.37bn in the March quarter, according to accounting firm BDO, with lithium cementing its place as the hottest property on the capital markets.
BDO will release its quarterly cashflow financing report on Australia’s junior explorers on Tuesday, showing the remarkable turnaround in the fortunes of the nation’s exploration sector after the initial wave of the pandemic receded.
The capital markets contributed only $834m into explorers in the first three months of 2020 as raisings in the sector hit a four-year low. That figure almost tripled a year on as iron ore set new records, copper and nickel prices soared and lithium rebounded from a grim 2020.
The latest BDO report shows Australia’s mineral juniors raised $2.37bn in the March quarter – a record since the accounting firm began tracking the sector in 2013 – with more than 80 per cent of listed exploration companies reporting cash balances of more than $1m.
BDO head of global natural resources Sherif Andrawes told The Australian the rush to market had slowed in the back end of the quarter but said that was more likely to do with existing cash levels than any lack of appetite in the market.
“The juniors that are already on the market have got the money they need pretty much for probably a couple of years,” he said.
Over the past year, the gold sector has dominated the capital markets as uncertainty around the coronavirus pandemic reigned, but its run ended early in 2020 after industrial economies announced waves of infrastructure spending, sending copper, nickel and lithium prices soaring.
More than 74 per cent of the funds raised in the March quarter went to 48 companies, each of whom raised more than $10m, according to the BDO report.
The lithium price crash in 2019 and 2020 pushed many Australian-listed lithium plays to the edge, but resurgent prices for the battery making commodity have put it back in the market spotlight.
Nine of the 48 companies in BDO’s $10m club were lithium plays, according to Mr Andrawes, and they collectively raised $499.8m, easily outpacing the $328.6m in gold raisings for the quarter. Piedmont Lithium tucked away the biggest single-market issue, worth $160.8m, with Europe-focused Vulcan Energy Resources raising $119.8m – partly backed by Gina Rinehart’s Hancock Prospecting – and Ioneer raising $80m. On top of that, four graphite companies raised a collective $134.5m, and rare-earths plays another $146m.
“We know the battery minerals industry has been hot in recent times but the dominance of lithium and other battery minerals companies this quarter has taken us by surprise,” Mr Andrawes said. “With demand rising, it was always going to come, it was just a question of when. But I’m surprised it was this early.”
Uranium was the other surprise sector in the period, with four companies raising a combined $264m. Although that figure was dominated by Paladin Energy’s latest $192.2m rescue package, Deep Yellow raised $42.8m and Bannerman Resources and Lotus Resources another $12m each.
Despite four quarters of growing support for the sector, exploration spending fell slightly in the period. The March quarter, affected by the cyclone season, traditionally sees a drop in activity from the juniors.
But Mr Andrawes said BDO expected spending levels to remain constrained, despite cash levels held by the sector, as skill shortages across the industry slowed work.
“We understand from several of our mining services clients that nearly all drill rigs are operating at full capacity and that there is a sector-wide shortage of skilled labour,” the report said.
“The issue that this poses for the sector is that drilling services companies have become more selective in the size of drilling programs (in terms of metres drilled) that they take on.
“Explorers have had to expand or revise their proposed drilling programs and, as a result, conduct more studies and surface sampling on their tenement areas.
“High demand for sample testing has also created a backlog in laboratories, which is leading to extensions of turnaround period for results.”
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