Explorer spending, resources IPOs up: BDO

A quarterly review of the comings and goings of ASX-listed exploration companies by accounting and corporate advisory firm BDO has highlighted a broad recovery in the resources sector, with battery related commodities leading the way.

BDO’s Explorer Quarterly Cash Updated examines the cash position of ASX-listed explorers.

In the three months to March, total exploration spending fell to $305 million, down from $354 million in the December quarter, with average exploration expenditure falling from $510,000 to $440,000.

Net operating cash outflows fell from $695 million to $514 million, with administration spending down from $213 million to $175 million.

However, the report found a broad recovery in the resources sector with a 13 per cent increase in exploration expenditure to $305 million.

BDO national leader Sherif Andrawes said battery related commodities, such as lithium and cobalt, led the way, on the back of growing demand for electric cars, accounting for half of the funds raised by exploration companies via initial public offerings.

“The welcome recovery we saw in the December 2016 quarter has continued,” he said.

“Cash inflows increased once again, as did the number of resource company IPOs.

“We anticipate this revival of increased exploration activity to continue into the next quarter.”

Mr Andrawes said BDO would wait to see what impact the federal government's decision to scrap the exploration development incentive as part of the 2017-18 federal budget would have on junior explorers. A new tax scheme has been slated to take its place

“We would expect that as the M&A phase continues and with a return of equity to the broader community markets, exploration will again be a strategic priority for a number of companies and that the EDI may stimulate this activity earlier in the process,” he said.