Big lithium gains as financing improves for explorers

Financing inflows for ASX-listed juniors and small cap explorers recovered in the March quarter, with lithium explorers among the biggest beneficiaries, according to the latest research from BDO.

Cash inflows for the March quarter were $908 million, representing an increase of 7 per cent from $848 million in the December quarter.

Of the total figure, $154 million of the cash inflows were from lithium companies, which is more than double the $76 million raised last quarter.

Pilbara Minerals, which was classified as an explorer by BDO, was the largest contributor among in the lithium players, raising $50 million in the quarter via the issue of shares.

BDO global leader of natural resources Sherif Andrawes said the March quarter marked the first time financing inflows were reversed since the June quarter of 2018, but was still below the two-year average of $1.34 billion.

“The three quarters leading into June 2018 were a golden period for the ASX-listed juniors, when most raised sufficient funds to see them through the next few years,” he said.

“While we’re not back at that level of investment, the March quarter is a positive result for the Australian resources sector with a notable increase in capital raising activity, especially by lithium explorers.”

Mr Andrawes said the positive conditions in the March quarter may have explained the share markets’ renewed focus on higher risk commodities like lithium.

He said while the upturn in the March quarter was positive news, junior explorers still appeared to be finding conditions tough.

“There is no doubt that junior explorers in general are finding cash hard to come by and as a consequence are reducing exploration and administration spend,” Mr Andrawes said.

“But it’s important to mention that this does not mean that exploration has reduced – in fact the level of exploration occurring actually appears to be healthy.”