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Death to the zombies

here has been plenty of discus- undergo major revamps (Black Tom’s) as mass redundancies
Tsion in the Australian media were widespread, from geologists and geophysicists to office
about the likely economic impact administrators and accountants.
of the end of the Jobkeeper pro- When the sector did eventually begin to bounce back (starting
gramme on March 31. with gold explorers in 2015), the structure of the industry had
Jobseeker was introduced as a changed. The hardship of the downturn had led to a reassess-
temporary measure by the Austral- ment of how an explorer should be run.
ian Federal Government to ensure businesses wouldn’t let thou- Out went the office manager, second accountant, tenement
sands of workers go as the pandemic and lockdown gripped. manager and data archivist, those jobs could be covered by a
It appears to have been successful with unemployment rates single administrator. On the technical side, the managing direc-
not rising to the levels feared. However, there is growing con- tor and exploration manager took off their Hugo Boss suits and
cern, expressed on numerous occasions by leading economists put the RM Williams chinos back on and headed out in the field.
and even the Australian Restructuring Insolvency and Turna- Companies realised they didn’t need large offices and mas-
round Association that the Jobkeeper programme will eventuate sive overheads, choosing instead to save money by sharing
in a slew of “zombie” companies come April 1. services with similar sized companies. Having seen their com-
According to ASIC data, insolvencies dropped following panies successfully cut their cloth during hard times, sharehold-
the onset of the pandemic, from an average of 2,086 a quar- ers are now demanding that general administration costs are
ter between September quarter FY2019 and December quar- kept low with a greater percentage of funding going directly into
ter FY2020 to 1,496 from March quarter FY2020 to September the ground.
quarter FY2021. That is why today, with the exploration boom in full swing,
This would suggest Jobkeeper is working, allowing business- West Perth is a shadow of the place it used to be. Instead of
es to survive during the pandemic. However, the fear is that lifestyle mining, executives are expected to deliver a return, and
rather than using the safety net to drive changes in their struc- quickly.
ture and strategy, many businesses are simply being propped Morgans Financial’s Paul Carter has witnessed the shift in
up by Jobkeeper. Instead of buying them time to alter their ap- approach during the most recent boom, particularly in the way
proach, Jobkeeper has simply kicked the problems down the new floats are operating. Morgans was involved with several
road (to April 1). successful floats in 2020 (see our cover story from page 18)
If businesses are looking for inspiration on how to effectively “There are still the usual prospective floats where companies
alter their structure and survive the cataclysmic changes the have put together projects which don’t make sense, but I think
world has undertaken, they could do worse than look at the you see a lot less of the $5 million IPOs of previous booms
Australian resources industry, and the exploration sector in par- where funds were used to have an office, a car and lunch every
ticular. day,” Carter told me. “We haven’t seen that for a few years now
The pandemic and subsequent economic crisis has not nega- and even with money available, you need all of it to run the com-
tively impacted Australian explorers – if anything it has been the pany.”
opposite with the sector enjoying its strongest run in more than Having been forced to do more with less during fallow times,
a decade. explorers are finding this is still achievable when exploration
The ASX has always been home to zombie explorers; compa- programmes ramp up and investors are demanding this higher
nies with assets and management and even the occasional ex- productivity.
ploration programme but which generally post very few market “Every dollar you spend takes you a dollar closer to your next
announcements from one quarterly report to the next. capital raising so you need to ensure you get results,” Carter
In the last great exploration boom (2004-2012 with a few cor- said. “Results are getting rewarded but that means you can’t live
rections in the middle) companies could largely get away with the lifestyle of the corporate credit card; you have to do the work
such an approach with investors happy to back a company with to give shareholders bang for their buck.
a climbing share price, regardless of the underlying value and “There aren’t as many bandits as their used to be because
cost structures in place. shareholders won’t stand for it. The best way to make a return is
In those heady days, the vibrancy of the exploration sector to get the share price up and the best way to do that is through
could be accurately measured by the lunchtime bookings at the exploration results.”
restaurants of West Perth, the heart of the Australian resources The result is far fewer zombie explorers on the ASX. It can
sector. only be hoped many other Australian businesses are currently
When the market was buoyant, the tables were full, the wine following a similar path.
was flowing and the conversation was boisterous as East Coast
and international financiers marvelled at the ability of some jun-
ior company executives to send the share price rocketing off
the back of parsimonious exploration budgets and long lunches.
Once the music stopped in 2012, iconic West Perth institu-
tions either closed their doors (Julio’s, Villa d’Este) or had to dominic@paydirt.com.au @DominicPiper

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