The flood of investment capital and new floats in the mineral exploration sector finally seems to be flowing through into increased exploration activity.
After a long decline in quarterly exploration expenditure, the junior exploration companies, often regarded as a leading indicator of exploration activity, have turned the corner.
Figures compiled by Intierra Resource Intelligence recorded an improvement of 29 per cent in the June quarter, with $105 million being spent on exploration, compared with $82 million in March.
The industry stuck to its June budget, having reported June-quarter budgets of $107 million versus $105 million actual.
If the next period’s budgets are also delivered as promised, the industry can look forward to a further 12 per cent exploration increase in September, with juniors expecting to spend $118 million in that quarter.
Despite the increased expenditure, juniors are also managing to keep the coffers topped up by means of IPOs, spin-offs, rights issues and other funding measures.
Total cash-at-hand improved from $735 million in March to $767 million in June.
With commodity prices trending upwards, and alternative investments such as real estate perhaps topping out, it’s no surprise that investment continues to flow into the resource sector.
Anecdotal evidence from drilling companies and other service industries backs up this trend, with many exploration companies finding it extremely difficult to source an available drill rig.
Looking longer term, the 2004-2005 annual mineral commodity outlook by government economic research group ABARE predicts an overall increase of almost 19 per cent in the export value of mineral exports, up to $63 billion.
Ranked in decreasing order of export value – coal, iron ore, gold, alumina, nickel, aluminium, copper, iron and steel – only gold is predicted to fall in export value. Predictions are based on higher commodity prices, and an assumed depreciation of the Australian dollar, particularly against the US dollar.
• Mike Kellow is director of sales and marketing at mining research group Intierra Resource Intelligence. www.intierra.com or mikek@-intierra .com