Juniors have thrived in the search for future-facing commodities, while investment in coal suggests that sector won’t go quietly.
JUNIOR miners are well positioned to benefit from growing investment in the transition to greener energy, according to a report into funds raised in the past quarter.
ASX-listed juniors raised more than $3.02 billion to fund their exploration ventures in the December 2022 quarter, according to BDO’s latest explorer quarterly cash report.
Six of the 10 IPOs during the period were by exploration companies related to future-facing commodities such as lithium, hydrogen and rare earth metals.
The report’s statistics are based on a BDO analysis of 51 companies that raised more than $10 million during the quarter.
BDO global head of natural resources Sherif Andrawes said the data reflected the stock market’s role in the energy transition.
“In general, the IPO market was very weak in the second half of last year when the big IPOs stopped, but if you look at the IPOs that did happen, they tended to be junior explorers and they tended to be in this space in the energy transition,” Mr Andrawes told Business News.
“The energy transition is clearly something that’s going to transcend shorter-term inflationary and economic issues.”
Mr Andrawes said the supply required to meet net-zero commitments wasn’t readily available.
He said investors were funding explorers to help meet future needs.
“We are seeing equity providers, off-takers and all sorts of investors coming in … and the exploration sector are the ones that are benefiting from that,” Mr Andrawes said.
Fruitful financing
The $3.02 billion raised by Australian explorers in the December quarter represents a 66 per cent jump from the previous quarter.
The resurgence comes after the $1.82 billion raised in the September quarter was affected by the “temporary tightening of capital markets amidst global economic uncertainty”, according to BDO.
Gold explorers attracted the strongest investment of $379.68 million for the quarter, closely followed by rare earth metals ($369.67 million) and lithium ($343.51 million).
For the 2022 calendar year, lithium topped the charts after explorers raised $1.2 billion, making it the leading commodity for a second consecutive year.
“This aligns with expectations for a strong market appetite for battery mineral investments,” BDO said in the report.
Fossil conflict
Green energy wasn’t the sole focus of investor interest, however.
Coal producers and explorers sourced $519.8 million for the 2022 calendar year, a significant increase from $160.19 million raised in the 2021 calendar year.
“The Russia-Ukraine induced global energy crisis has led to higher natural gas prices for most of CY22 and has led to an increased reliance on coal for power generation,” BDO said.
“Coal consumption reached its highest historical level in CY22, which saw significant funds flowing to coal producers and explorers.”
Oil and gas hopefuls raised $611.9 million in CY22, due to higher natural gas prices and evolving market sentiment.
Perth-based rare earths explorer Hastings Technology Metals raised $191.4 million during the period, followed by Western Australia-based aspiring goldminer De Grey Mining, which raised $149.05 million.
WA companies Global Lithium Resources and Bellevue Gold also made the top 10 list.
Exploration cost
The spending surge by junior miners earlier in the year eased after exploration expenditure fell to $993 million in the December quarter.
The figure dropped below the record $1.04 billion and $1.07 billion spends in the June and September quarters, respectively.
But exploration expenditure remains at some of the highest levels observed since 2013 and represents “[C]ontinued strength in exploration activity”, according to BDO.
De Grey, which has spent more than any other surveyed exploration company in the past four years, spent $15.7 million during the December quarter.
But De Grey was overtaken by Sydney-based oil and gas producer Empire Energy Group, which spent $19 million in the same period.
BDO’s report also revealed an increasing trend in the number of small to mid-market explorers that undertook exploration spends between $500,000 and $1 million.
Mr Andrawes said it was a signal of good health for the sector.
“The advantage that WA has got is that it ticks so many boxes in terms of having the commodities that are being looked for in the energy transition,” he said.
“So, I think all of this points in the right direction for a sector that’s going to be strong throughout 2023 and hopefully growing as well.
“Some of the pressures we have seen in WA with the lack of people, lack of supply and equipment are easing now, and I think it’s going to be a very interesting year going forward.”
Challenges
Explorers were not immune to the inflationary pressures felt across Australia, however.
The spike in costs, coupled with energy shortages, geopolitical instability and labour issues presented a challenging landscape for emerging miners.
“Yet, despite these challenges, explorers not only persevered throughout the quarter, but the data would suggest that they thrived,” BDO said in the report.
“More importantly, the positive signals from this quarter’s data shows the sector’s potential to serve the world at a time when its need for resources is more profound and diverse than ever.”
Mr Andrawes said staff shortages were a prevailing issue in the industry.
“I think staffing has been an issue and I think it’s one that continues to be an issue,” he said.
“Finding people with expertise to come into the industry at all levels.”
In March 2022, BDO released a report analysing generation Z’s sentiment towards the resources industry, and how to change that view to harness a future workforce.
Mr Andrawes said explorers could shift gen Z’s negative perception of the mining industry by highlighting its green energy transition work to attract future workforces.
“Mining needs to be reframed to say we are actually part of the solution,” he said.
Future
Peak regulatory bodies are casting a spotlight on resources industry companies’ sustainability credentials as the focus intensifies on the green energy transition.
In February 2022, the Australian Securities and Investments Commission announced it was launching its first court action against alleged greenwashing conduct.
Mr Andrawes said more IPOs with a focus on clean energy were in the pipeline for 2023.
He said those companies needed to be vigilant about the credibility of their sustainability statements.
“We are seeing ASIC in particular take more notice of those companies because those companies involved in the energy transition are more likely than not to be making statements about their own clean green credentials,” he said.
“We are seeing some cases of ASIC taking action against those companies if those statements aren’t well justified.”
Technology
While junior miners are forging their way in the industry, geoscientists and technicians at Perth’s CSIRO headquarters are working to improve rock characterisation to support the mineral exploration and mining industry.
CSIRO launched its $7 million geoscience drill core research laboratory in late 2021, which houses advanced mineral characterisation equipment within its Kensington facility.
“The facility provides a test bed for the research community to work with the resources industry to develop new workflows to enhance success and productivity in mineral exploration and mining, working in collaborative projects with industry,” CSIRO’s website said.
Mark Pearce says the lab is currently scanning critical minerals, including rare earth metals and lithium. Photo: CSIRO
The lab, which was partly funded by the Science and Industry Endowment Fund to refurbish the space, features commercial core scanning instruments and CSIRO’s Maia Mapper system.
Characterisation program research director Mark Pearce said the different instruments collected varying forms of information, such as what minerals were present in the drill core and its chemistry.
He said the multiple instruments allowed them to look at the same samples through slightly different lenses.
“By having multiple viewpoints of the core, you can often solve problems that you can’t by just looking at one of the data streams,” Dr Pearce said.
“Another instrument that we have is a medical CT instrument, like you would find in a hospital for analysing larger samples and a micro-CT instrument, which analyses a few centimetres of sample right down to very small sub-micron analysis.
“That gives us a 3D context, which you don’t get from the 2D scanning.”
The lab is currently working on scanning various critical minerals including rare earth metals and lithium as a part of ongoing projects.
Dr Pearce said a recent project used the lab to better understand the origin of iron ore and supergene deposits in the Pilbara.
“The project was in collaboration with all the major iron ore producers, with everybody working together to understand the origin of the Pilbara iron ore and the supergene deposits,” he said.
“The data was then used to guide sub sampling, and the smallest scale analyses and outputs of that project include new dates for the formation of the iron ore in the Pilbara, which was quite an exciting output.”
The lab aims to become a training ground for students to support the development of the next generation of geoscientists.
