Cash flowing into the exploration sector fell sharply while initial public activity stagnated during the March quarter, new research from BDO has shown.
Cash flowing into the exploration sector fell sharply while initial public activity stagnated during the March quarter, new research from BDO has shown.
The firm’s quarterly exploration spending report reflected ‘global economic unrest’, with financing cash inflows for the period dropping by 55 per cent to $1.35 billion.
Explorers, in turn, put the brakes on spending during the three months to March which was down 17 per cent on the prior quarter.
The average bank balance of an exploration company fell from from a high point of $13.2 million in June 2022 to $10.2 million in March 2023.
BDO global head of natural resources Sherif Andrawes said there was no doubt it was a challenging period for Australian exploration companies.
“This quarter really highlights a prospector's dilemma – how to balance optimism and caution in this volatile market,” he said.
“This quarter shows a distinct decline in the ability of our explorers to secure funding, which we attribute to the current market conditions being felt by most sectors right now.”
The March quarter was typically a quieter period for funding however, the report observed, and that it was likely activity would tick up again in June.
“We are still seeing sustained demand for gold, lithium and graphite in response to the anticipated growth in the EV industry worldwide,” Mr Andrawes said.
“So while the quarter did not deliver bright news in terms of operations and investment, the demand for these commodities – that we have here in abundance – provides a very positive future outlook for Australia’s explorers.”
There were only seven new listings during the period, according to the analysis, in what BDO described as an observable slowdown on the IPO front.
It’s the first time since September 2020 that the sector saw no growth in the number of ASX-listed exploration companies lodging an Appendix 5B.
BDO maintained that advanced gold explorers were favourably positioned, with gold proving a popular safe haven during the period.
