ASX companies splash more cash on exploration

Australian-listed companies are spending more on exploration, according to the latest research from BDO.

For the second time in more than two years, the average amount junior Australian companies spent on exploration increased quarter-on-quarter, lifting to $451,000 in the three months to September, BDO’s explorer quarterly cash update found.

BDO natural resources national leader Sherif Andrawes said although the spend was still less than half that of the $1.1 million high recorded in March 2014, it was a strong indication that positive market sentiment was funnelling cash through to junior explorers.

“Gold, oil and gas stocks received significant financing cash flows, with 10 gold companies and four oil and gas companies raising in excess of $10 million during the September 2016 quarter,” Andrawes said.

“The interest in gold stocks, which was elevated following the Brexit decision, has continued due to uncertainty in global markets following the Trump election win.  This is likely to remain until the Presidential inauguration in January and the release of Trump’s economic policies.”

Net operating cash flows increased during the September quarter to $707 million, a 34 per cent rise from the $527 million recorded for the June 2016 quarter.

“The increase in funds committed to exploration and development reaffirms the improvement in industry sentiment, which was identified last quarter,” Andrawes said.

“Total net financing cash flows decreased by almost a third for the September 2016 quarter, having increased by more than 300 per cent during the previous quarter.”

However, Andrawes added that the ability of explorers to secure debt and equity funding remains significantly higher than in periods prior to the June 2016 quarter.

He said this “indicates that there is still investor appetite for companies demonstrating strong fundamentals and reasonable valuation levels.”

The BDO explorer quarterly cash update is based on the cash position of Australian-listed explorers taken from quarterly Appendix 5B reports lodged with the ASX.

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