Page 10 - gmj142-Jan-Mar2-mag-web

NEWS

“ There are a lot of companies who, rather than going hand-to-mouth, have

raised enough for two or three years.

chest in the MT50 is now $8.9 billion.” last them through the pandemic and general industry outlook
Among the established companies in the cohort, the was uncertain. The data clearly shows that there is money to
biggest risers from 2019 were all gold companies, including be raised, and explorers know it.”
Ramelius Resources Ltd, Alkane Resources Ltd, West The September quarter was particularly strong for gold
African Resources Ltd and Perseus Mining Ltd. juniors, with more than $700 million raised.
Eve said he expected M&A activity to increase in 2020 but The level of fundraising among gold juniors reflects the
also pointed to a likely increase in exploration, a trend which market’s appetite for gold equities and the relative lack of
had already taken hold during 2020. new opportunities for investors among the established
While the established producers of the MT50 are putting their miners.
balance sheets to work, the emerging crop of developers are “The gold producers don’t need to raise capital because they
finding investor support for their activity. are printing money, so the explorers are taking advantage of
Of the 11 new entrants to the MT50 for 2020, four were gold that,” Andrawes said.
exploration companies, led by De Grey Mining Ltd which While fundamentals point to continued support for gold
experienced a 3,123% increase in market cap on the back of juniors, Andrawes does expect the volume of capital raisings
its Hemi discovery in the Pilbara region of Western Australia. to slow.
“Eight explorers [not all gold-related] entered the MT50 for “The December quarter may show a leveling out of capital
the first time in 2020; that shows the market believes they raisings,” he said. “There are a lot of companies who, rather
can get into development,” Eve said. than going hand-to-mouth, have raised enough for two or
The level of investor support for junior explorers was three years.”
emphasised in research by BDO into capital raising activity What is expected is an increase in exploration expenditure.
for the sector during the September quarter. While capital raising increased across both the June and
BDO’s quarterly Explorer Cash Survey showed funding for September quarters, money has yet to be deployed in the
the sector hit a two-year high, with total financing inflows ground to the same levels.
reaching $2.02 billion in the September quarter – a 51% “There was only a 10% increase in exploration expenditure
increase from the $1.34 billion recorded in June. The for the September quarter but that perhaps had to do
numbers represented a 142% increase since the four-year with access to site, availability of geologists and drillers,
low of $834 million recorded in March this year. equipment, etc,” Andrawes said.
The volume of capital raisings has meant the cash position General administration costs will be another area Andrawes
of ASX-listed explorers is the strongest cash position in the will be watching closely in the December quarter figures.
BDO report’s seven-year history with 74% of exploration “I thought in the March and June quarters the costs had
companies reporting a cash balance of $1 million or more. plateaued, but they were already up in the September
Andrawes said the September quarter had seen more quarter,” he said. “I hope the sector has learned the lessons
companies raising more money. of the past. It will be interesting to see whether they use
“Generally, you expect to see around 20% of the capital money raised wisely in the ground.”
raisings over $1 million; this time it was 40%,” he said. While existing companies have little need to raise cash,
“There were also fewer companies not raising money, doing Andrawes is already seeing heightened IPO activity.
nothing. “There are plenty of IPOs we are working on and they are
“A lot has changed since the March 2020 quarter when it all going well. It is not just exploration companies, there are
was questionable whether explorers’ cash balances would several mining services IPOs at the moment as well.”

Page 10