Commodities, Exploration/Development, News

Exploration spending reaches fresh seven-year highs

Exploration

Exploration expenditure soared to new heights in the September quarter, surpassing the lofty spending levels of the June quarter.

According to business advisory firm BDO, a total of $877 million was spent on exploration in the September quarter, while a record-breaking $2.55 billion was raised across the same timeframe.

More and more explorers were active on the ASX, with 704 companies lodging appendix 5Bs (exploration quarterly cash flow reports) across the three months – 62 more than the September quarter of 2020.

BDO global head of natural resources Sherif Andrawes believes an exploration boom could be among us, with many explorers exhibiting strong balance sheets to boot.

“With the increased number of new entrants over recent periods, the exploration sector is showing no signs of slowing,” he said.

“Fifty-six per cent of companies recorded net investing outflows, which is 13 per cent higher than the two-year average.”

88 per cent of explorers reported cash balances of more than $1 million in the September quarter.

Battery minerals explorers played a significant role in the exploration uptick, harnessing the growing appetite for electric vehicle adoption and the larger decarbonisation movement.

Furthermore, Andrawes believes those committed to understanding and honing their environmental, social and governance (ESG) standards are getting runs on the board.

“It is essential that all exploration companies, regardless of commodity exposure, constantly consider the relevance of ESG to their ongoing operations and also to any investment decisions and future strategies,” Andrawes said.

“The ones who are able to do so successfully will likely continue to be supported by investors and contribute to the push for a cleaner and greener economy.”

With more exploration companies on the ASX and more boasting strong cash balances, there’s enough evidence to suggest the exploration boom will continue.

Nevertheless, given the inevitabilities of labour shortages, COVID-19-related travel restrictions and other constrains, BDO suggest everything should be taken with a grain of salt.

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