Insight
Junior explorers
on the rise
The period of uncertainty and caution exhibited over the past few years, which
saw many of Australia’s listed junior explorers take their foot off the accelerator,
may have come to an end, writes Sherif Andrawes.
There has been a
tangible increase in
the ability of ASX
explorers to raise
funds, explore, and
invest.
[42] MINING MIRROR MARCH 2019
T
he positive sentiment witnessed
at the recent Africa Down
Under 2018 conference, saw
delegate numbers up on recent
years and conversations now focused on
finding suitable projects to buy or fund.
There has been a tangible increase in the
ability of ASX explorers to raise funds,
explore, and invest.
For several years, BDO has analysed
the quarterly reports of mining and oil &
gas exploration companies listed on the
ASX. BDO’s latest edition of the Explorer
Quarterly Cash Update (for the quarter
ended June 2018) on the cash position of
ASX-listed explorers, shows that across
the sector, investing cash flows increased
by 44% from USD411-million for the
March 2018 quarter to USD592-million.
The increasing trend in capital expenditure
observed over recent quarters demonstrates
that these companies are actively pursuing
investment opportunities to strengthen
or expand their scale of operations, in
addition to exploration activities.
The change of tide for ASX junior
explorers is further supported by the total
exploration expenditure for June 2018
quarter, reaching the highest level since the
June 2016 quarter. Exploration expenditure
increased by 15%, from USD366-million
for the March 2018 quarter to USD420-
million for the June 2018 quarter. This
represents the second-highest spend on
exploration during a single quarter since
March 2015. The Australian Bureau of
Statistics also reported that metres drilled
by exploration companies increased by
more than 44% for the June 2018 quarter.
Furthermore, the number of ASX-
listed exploration companies continues to
exhibit an upward trend, increasing for the
second consecutive quarter, from 702 to
705. Given the steady fall in the number
of ASX-listed explorers from 2012, the
recent uplift is very encouraging. There
were 30 exploration companies that raised
in excess of USD10-million during the
June 2018 quarter.
Of these, there were four gold, four
lithium, and four oil and gas companies.
Several of these companies have interests
in Africa, including West African
Resources (gold in Burkina Faso), which
raised USD36-million; Battery Minerals
(graphite in Mozambique), which raised
USD20-million; and Lukapa Diamond
Company (diamonds in Angola), which
raised USD17-million.
Africa has always held its reputation
as the land of opportunity; however, the
decline in commodity prices following
the mining downturn forced Australian
companies to focus on lower-risk assets
closer to home. The companies that made
it through the tougher times were able to
do so through reducing administration
costs. The continuation of the improved
performance in the past few quarters,
together with the availability of funds and
increased costs in Australia, is leading to an
increased appetite for ASX explorers to go
back into Africa.
Sherif Andrawes is the global and national
practice leader: Natural Resources at BDO
Australia.
www.miningmirror.co.za