Advisory firm BDO said seven of the 787 pre-revenue explorers on the ASX at March 31 were acquired in the subsequent three months, helping to shrink the bourse’s most populous sector to 779 companies by June 30.
While pre-revenue explorers still accounted for more than 35 per cent of all ASX-listed entities at June 30, it was the first sequential decline in the number of explorers since September 2020, when low interest rates triggered a record-breaking period of cash inflows to the high-risk sector.
BDO global head of natural resources Sherif Andrawes said the shrinking number of explorers “likely signifies the commencement of a healthy wave of consolidation activity across the sector”.
“This appears to be driven by tightening capital markets and rising input costs, both of which pose as significant challenges to project development for standalone exploration entities.
“During periods of abundant cash reserves and favourable financing conditions, explorers are typically able to independently advance their respective projects, resulting in fewer instances of consolidation.
“Today there is more uncertainty, and less cash is available. However, commodity prices continue to remain strong against historical levels which is a real positive for explorers.
“Commodity prices being strong while capital markets are weak provides an ideal combination of merger and acquisition activity. Consequently, many explorers are now inclined to advance their projects via consolidation, choosing this route over running the gauntlet with uncertain and volatile capital markets.”
Kingsland Minerals raised $3.6 million in June and managing director Richard Maddocks said equity markets seemed to have become “shakier” since then.
Kingsland shares were 17¢ on August 30 but have rallied more than 50 per cent to 26¢ a share on Monday on the back of graphite drilling results near the Northern Territory town of Pine Creek.
Graphite is a critical mineral used in the anodes of modern batteries, and Mr Maddocks said big miners were likely to use acquisitions to grab a footing in the critical minerals space.
“There is a definite fervour for these sorts of commodities in those larger mining houses,” he said.
“They would be looking at tier one projects in good locations and that is what we are hoping we have got in the Northern Territory.”
ASX-listed graphite miners received $154 million of cash inflows during the June quarter, according to data published by BDO.
Only gold and lithium miners raised more cash during the period, although the majority of the money raised for graphite was the $117 million that flowed into Syrah Resources from US government loans and AustralianSuper.
An oversupply of graphite has depressed prices for the battery mineral this year and forced Syrah to idle its Balama mine until prices improve.
BDO data showed $2.84 billion flowed into ASX-listed explorers in the June quarter; the fourth-highest quarterly inflows in the decade that BDO has kept the data set.
