The exploration sector is experiencing a significant downturn as investors remain weary amid heavy market uncertainty, but BDO says gold proves to be a bright spot.
The exploration sector is experiencing a significant downturn as investors remain weary amid heavy market uncertainty, but BDO says gold proves to be a bright spot.
BDO’s latest explorers report painted a bleak picture of Australia’s exploration sector, with expenditure dwindling to $643.5 million in the March quarter — a 19 per cent drop from the previous period.
It marks a four-year low for exploration spending, according the BDO's analysis, and tails off the steady rate of spending since the $267 million low in 2016. Exploration spending hit a high of $1.07 billion in the 2022 September quarter.
BDO pinned the March quarter's tightening of belts on reduced activity in the hampered lithium and nickel industries while pointing to the ongoing impacts of economic uncertainty and geopolitical tensions for the broader decline.
Gold explorers were the only companies with cash balances bullish enough to undertake significant in-ground spending campaigns in the current environment, according to BDO's analysis.
The average cash balance held by explorers fell to $9.8 million, representing a three per cent dip, which BDO said reflected a trend of capital discipline and cautious expenditure.
The deflated exploration spend was coupled with a decline in capital raisings to just 26 companies rattling the tin for more than $10 million, compared to 57 companies in the December quarter.
BDO’s global lead of natural resources and energy Sherif Andrawes said further pain could lie ahead for the exploration sector.
“The sharp decline in capital raising and exploration expenditure signals a broader trend of investor caution and market uncertainty,” he said.
“Our analysis for the quarter indicates a gloomy start for exploration companies in calendar year 2025.
“In previous quarters, explorers have been resilient in the face of softening commodity prices, particularly for those in uranium and lithium
“However, falling cash balances, reduced spending, and a declining number of companies reporting Appendix 5Bs are potential markers for further pain that may be felt by certain areas of the exploration sector.”
In terms of overall financing inflows, gold attracted $621 million in the quarter, which was more than double the amount generated in the same quarter last year.
Lithium financing inflows plummeted 90 per cent to $198 million compared to the prior quarter, reflecting investor caution amid soft commodity pricing. BDO noted uranium's momentum had also stalled and was now on a steady decline.
“This surge is attributed to gold's status as a safe-haven asset amidst ongoing macroeconomic volatility,” Mr Andrawes said.
“M&A activity in the gold sector has also increased, with notable transactions such as Gold Fields' acquisition of Gold Road Resources and Ramelius' offer for Spartan Resources.”
The quarterly analysis comes after the peak resources industry body warned change was needed to buck the trend after Australian Bureau of Statistics released its data.
BDO also took the opportunity to voice its concern over the scrapping of the Junior Minerals Exploration Incentive from the federal budget.
It said the removal of the scheme further exacerbated challenges for junior explorers.
"The elimination of supportive policies like the Junior Minerals Exploration Incentive adds to the difficulties faced by explorers,” BDO said.
“The outlook for the exploration sector remains uncertain, with ongoing challenges in capital raising and investment activity.”
