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EDITORIAL

Despite the softening market

conditions, miners and explorers

don’t seem too concerned

by Dominic Piper

My overriding takeaway from this edition is that miners and explorers took advantage
of the rampant gold price and equity markets in 2020 to secure funding for the next
year or two, at least.
They are now insulated from the market. Junior explorers now have no need to look
over their shoulder or plan their next drilling campaign around a capital raising. They
have locked in enough money to see them through any market softening and can get
on with the business of exploration, discovery and development.
In this issue, companies such as Apollo Consolidated Ltd, Calidus Resources Ltd
and OreCorp Ltd acknowledge they have been freed – liberated almost – by the
decision to tap the market for larger amounts of cash when they were being favoured.
“The market in general has seen a divergence between the producers and wannabe producers but we are insulated
because of our cash position. We don’t have to look over our shoulder after every programme we do,” Apollo managing
director Nick Castleden says on page 26.
Figures released by BDO confirm the anecdotal evidence of this edition.
In its Explorer Quarterly Cash Update, BDO found that junior explorers raised an astonishing $2.37 billion in the March
2021 quarter, up 7% from a just as remarkable $2.21 billion in December. Some 48 of these companies raised funds of
$10 million or more – 75% of the total funds raised – adding weight to Castleden’s argument about insulating against
market dynamics.
This trend for larger capital raisings has meant companies can get on with the business of exploration – making
discoveries, defining resources and developing deposits – without checking the share price after every drill result.
It could lead to greater success. Unshackled by the need to please the market or spend vast amounts of time and money
marketing the stock, explorers can afford to take risks and test more obtuse theories. This is where big discoveries are
often made.
Even for the greatest exploration success story of the last 18 months – De Grey Mining Ltd (see our cover story on page
16) – the decision to raise $29 million then $100 million early last year set the company up to execute its plans.
If it hadn’t raised that amount, the De Grey management team could have felt pressure to put out a maiden resource for
its Hemi discovery sooner, before it had a clear plan of what it would do next.
Instead, De Grey’s sizeable cash position has allowed it to consider the best path forward for Hemi so that when it comes
time to raise funds for feasibility studies, it should have a market value which will allow it to take the project on alone for
much longer.
The situation is similar for the miners.
The gold price may have flattened but established miners are still operating with near-record Australian gold prices.
They are not experiencing the capital growth they were last year. Of the ASX’s three largest gold miners, only Newcrest
Mining Ltd has held its value since January 1 (down 0.16% to June 30). Evolution Mining Ltd (down 7%) and Northern
Star Resources Ltd (down 20%) have found life much tougher after their stellar run between 2015 and 2020.
However, free cash flow is still cascading out of operations. This is being ploughed back into brownfields and even
greenfields exploration. Meanwhile, shareholders are willing to sit tight because of the dividends being paid and there
appears little on the road ahead that will force them to alter course.
So, despite some apparent caution about Australian gold’s future amid a flat price environment, it appears miners and
explorers themselves are set up for several more years of success.

dominic@paydirt.com.au @Paydirt_Media @paydirtmedia @PaydirtMediaAustralia

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