BDO’s report on the cash position of Australian-listed explorers for the December 2017 quarter (based on quarterly Appendix 5B reports lodged with the ASX) confirms the growing positive sentiment in the resources sector with the start of a new cycle of investment across a range of commodities. Stronger global economic growth and rising commodity prices is underwriting both new investment and mining operations, indicated by increases in both financing and investing cash flows for the December 2017 quarter.

Exploration expenditure for the December 2017 quarter exceeded $400 million for the first time since the March 2015 quarter, financing cash inflows increased by $668 million to $2.05 billion and net investing cash flows more than doubled to $524 million compared to the September 2017 quarter. These positive statistics become even more impressive when considered in light of the December quarter typically being the slowest quarter in terms of capital raisings and investment and exploration expenditure.

The number of companies lodging an Appendix 5B report increased to 703 for the December 2017 quarter, with 12 Initial Public Offerings (‘IPOs’) raising $69.8 million for the quarter. Two coal explorers and one gold explorer transitioned to production during the quarter and one company changed operations to focus on resource recovery.

BDO National Resources Partner, Adam Myers said “Despite a projected 22% decrease in cash outflows for the March 2018 quarter, to $2.13 billion, we expect 2018 to be a big year for explorers. With automation and big data becoming a reality for the mining industry, we anticipate substantial productivity gains for the sector as a whole.”

A feature for exploration companies is the relative speed that sentiment has turned. “With 42 companies raising over $10 million each in the quarter it is clear that there is plenty of life in the sector now.  While much of the focus has quite rightly been on battery minerals, such as lithium, cobalt and graphite, the funds being raised are across the board with oil & gas, gold and iron representing three of the top four commodities by the amount raised,” Myers said.

Key findings of the quarterly update reveal:

Total exploration expenditure increased by 7% for the quarter

A shift towards higher exploration expenditure for the December 2017 quarter, with exploration expenditure from $300k upwards for the December 2017 quarter exceeding the two-year average.

Financing cash inflows increased by 48% during the quarter to reach $2.05 billion, compared to $1.39 billion for the September 2017 quarter.

Financing cash outflows also increased for the quarter, up 21% to $314 million. The result was a 54% increase in net financing cash flows to $1.74 billion for the quarter.

The number of companies lodging an Appendix 5B report increased to 703 for the December 2017 quarter, with 12 Initial Public Offerings (‘IPOs’) raising $69.8 million for the quarter.