Exploration cash follows green energy trend

A green energy wave has helped lift the amount ASX-listed exploration companies raised last quarter to $2.37 billion, up 7 per cent from December, BDO research shows. The BDO cash position report shows 80 per cent of exploration companies reporting cash balances of $1 million or more, the highest proportion recorded since the business advisory group commenced such analysis in 2013. Sherif Andrawes, BDO. A flood of funding toward battery minerals and clean energy commodities was the striking trend, BDO global head of natural resources Sherif Andrawes said. “We know that 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,” he said. “We are seeing investors tailoring their preference in line with global trends and Australian battery minerals explorers have capitalised on this opportunity to raise funds for the advancement of their operations.” Townsville battery chemicals plant proponent Queensland Pacific Metals and Townsville battery factory proponent Magnis Energy Technologies were named among the 48 companies that raised funds (through debt and/or equity) greater than or equal to $10 million during the March 2021 quarter. Pure Hydrogen, with a number of Queensland projects in the pipeline, also made the list. Mr Andrawes said another overarching observation from the quarter was the persistence of the positive financial indicators observed in the previous quarter. “The substance behind these indicators, however, has shown a gradual transition away from just gold, which during the COVID-19 recovery period was the preferred safe haven asset. Instead, funds are now flowing toward battery minerals and clean energy commodities such as lithium, graphite and copper,” he said. The 7 per cent growth in funds raised could mainly be attributed to several large raises within the sector, he said. Paladin Energy recorded the largest financing inflow for the March 2021 quarter, raising $192.5 million, followed by Piedmont Lithium ($160 million-plus) and Geopacific Resources ($123.49 million). There was a lower number of capital raises oevrall, which could be due to the fact that the average cash position had grown by 17 per cent to $9.70 million, with 81 per cent of companies reporting sufficient funds to support operations for more than two quarters. “This may have negated the urgent need for explorers to raise funds in the March quarter, as companies turned their focus instead toward spending in the ground and investment,” Mr Andrawes said. He said the first quarter of 2021 had proven to be a strong start to the year for Australian explorers, and was showing signs of a transition away from mere recovery to a new focus on ESG (Environmental, Social and Corporate Governance). “ESG has become an inescapable point of emphasis in the world today. The global push for lower carbon emissions and clean energy has put a spotlight on EV-related commodities and greener energy alternatives, which we are already seeing in the March quarter,” he said. “The way in which these commodities are sourced is also a key consideration point for today’s investors. For example, even though cobalt forms a major component of rechargeable batteries used in EVs, almost 70 per cent of the world’s cobalt is sourced from the DRC, which is often associated with ESG concerns around ethical labour and sustainability. Australia, having almost 20 per cent of the world’s cobalt reserves, is well positioned to capture a significant portion of future demand. “Australian explorers will need to continue to place greater emphasis on demonstrating a mature approach to ESG matters in their operations to continue capitalising on this trend.” Read the full report HERE

Exploration cash follows green energy trend

Industry Queensland

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