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- BDO Australia reports a 110 per cent increase in total resource exploration for Q4 2021, hitting an eight-year high of $973 million
- The quarter recorded a stark 263 per cent increase in net investing cash outflows as anticipated in the previous quarter
- BDO Global Head of Natural Resources Sherif Andrawes believes that exploration expenditure shows no signs of slowing down in the next quarter
- The report highlights a sharp increase in the number of companies lodging Appendix 5Bs jumping from 704 in the last quarter to 740 in this quarter
- Exploration activity will continue to grow but may face challenges like resource availability, travel restrictions and skilled labour shortage
BDO Australia has reported a 110 per cent increase in total resource exploration, hitting an eight-year high of $973 million for Q4 2021.
The financial health of Australian-listed resource explorers on the ASX was shown to be healthy as it was filled with record IPO activity, capital raising and investment spending in the quarter ended 31 December 2021.
According to the business advisory firm, the quarter recorded a stark 263 per cent increase in net investing cash outflows which reflects the growth in investment expenditure that was anticipated in the previous quarter.
The report highlighted a sharp increase in the number of companies lodging Appendix 5Bs (exploration entity quarterly outflow reports) jumping from 704 over the previous quarter to 740 in this quarter.
BDO Global Head of Natural Resources Sherif Andrawes believes that exploration expenditure showed no signs of slowing down despite record levels of activity in 2021.
“The sector is continuing to send out very positive signals, with growing investment and exploration spending still well-supported by a steady access to funding,” he said.
The quarterly report also noted that battery mineral companies continue to be a key investor focus due to the rising trend of electric vehicles and low carbon emission targets.
The larger investments spends were undertaken by lithium companies, with Liontown Resources Limited (LTR) recording the largest investment outflow of $290 million.
Consistent with the previous quarters reported, the top four largest exploration spends in the Q4 2021 related to gold companies in large-size development or early-stage producers, with the next five comprising of companies in oil and gas.
The BDO notes that the sharp increase in exploration expenditure reflects a continuation of an increased level of exploration activity and increasing costs for drilling, labour and equipment hire.
The ABS estimates a total exploration expenditure of $3.6 billion in 2021, a 28 per cent increase from the previous year.
Minerals Council of Australia CEO Tania Constable believes that despite the “encouraging” exploration expenditure, more needs to be done to ensure that new discoveries of mineral deposits are utilised at the earliest possible time.
“Australia has lagged behind in discovering new major deposits of the copper, nickel and cobalt the world needs as it transitions to a net-zero emissions future,” she said.
“We risk missing out on the enormous opportunities the growth in demand for these commodities presents our economy.
“To improve the chances of making a major discovery, more government funding should be provided to pre-competitive survey programs.”
It is expected that exploration activity will continue to grow in light of consistent strong cash positions and the higher number of listed exploration companies.
It is noted that the growth may continue to face similar challenges as the previous quarters, like the availability of resources, travel restrictions and skilled labour shortage.
