Mining and Heavy Industries

Exploration growth reflects positive sentiment in mining: Report

A major increase in exploration spending in the September quarter of 2017 “reaffirms the growing positive sentiment” in the resources sector, according to a new report from finance firm BDO.

BDO’s latest Explorer quarterly update, released on January 9, says the 16% increase in exploration expenditure in Australia in the September 2017 quarter, was “the largest increase exhibited during a single quarter since 2014”.

Spending, according to BDO’s calculations, rose from $338 million in the June quarter to $393 million in the September quarter.

Furthermore, BDO reports inflows of finance into mineral explorers rose 7% during the same quarter, to $1.39 billion.

“This suggests that the increased investor appetite for exploration companies exhibited last quarter may be sustained going forward and was not the result of a short-lived trend in the market,” the report states.

“The number of ASX listed exploration companies to lodge Appendix 5Bs [a financial report related to mining exploration] increased for only the second time since the September quarter of 2013.

“This endorses our theory from previous reports that the number of exploration companies exiting the market is plateauing and that the resources sector is entering an upward trajectory.”

The bulk of explorers continue to reside at the lower-range of the spending spectrum, with the majority of companies considered in the report spending less than $300,000 on exploration.

However, there was a 4% rise in the proportion of reporting companies spending over $1 million on exploration in the quarter, with that proportion rising from 12% to 16%.

“We also note there has been a declining trend in the percentage of companies with nominal amounts of exploration expenditure (i.e. less than $50,000),” BDO said. “This further evidences the fact that the inactive exploration companies with less attractive assets are being squeezed from the market.”

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