Gold, rare earth capital raises dominate September quarter, exploration spend hits new record

Capital raisings by Australian exploration companies totalled $1.29 billion in the three months to 30 September, with gold stocks taking more than a quarter of that sum, followed by rare earths and oil and gas hopefuls.

Financial services firm BDO Australia also reported that exploration spending came to $1.07 billion, the highest amount recorded since the Sydney-based company began its sector analysis in June 2013.

The breakdown of the capital raising figures show that gold remains the number one game in town, helped of course by the fact that the precious metal explorers form the numerically largest slice of the 779 listed resources companies. The gold sector raised $289.17 million over the three-month period.

Across the commodity board the biggest capital raisers were gold play Genesis Minerals (ASX: GMD) with $96.95 million from share and options issues; cobalt hopeful Jervois Global (ASX: JRV) which brought in $88.34 million by way of borrowings; nickel play Mallee Resources (ASX: MYL) raising $68.25 million with a mix of new shares, borrowings and other sources; rare earth play Hastings Technology Metals (ASX: HAS) bringing in $68.11 million with new share issues; and Tietto Minerals (ASX: TIE) banking $65.03 million from new shares and options exercised.

Rare earth players beat out lithium, cobalt explorers in fund raising

BDO’s latest Explorer Quarterly Cash Update: September 2022 shows that rare earth company raisings soared to $165.9 million over the three-month period, a seeming return to the frenzied year of 2011 when multiple REE plays sprang out of nowhere as prices for the 15 elements soared.

This represents an investor response to Canberra’s announcement in March of a $240 million fund to create an Australian rare earths mineral industry.

Oil and gas companies hauled in $152.8 million — presumably dominated by the gas sector given all the activity in that industry.

“This is not surprising as developed countries look to wean from Russian energy imports in favour of energy products produced by geopolitically stable exporters, like Australia,” BDO stated.

Lithium and cobalt also got a look-in, with raisings of $115.5 million and $88.3 million, respectively.

Copper financing stalls as shortages loom of that key metal

The stark news from the survey was that copper companies managed to raise a mere $17.9 million.

While this may be explained partly by the fact that Australia’s copper sector is dominated by majors and mid-tier companies, it also comes at a time when multiple predictions are being made of severe shortages of this metal vital to the electrification transformation. Chile’s state copper company Codelco is forecasting global shortages out to 2032.

Also languishing is the graphite sector (vital for lithium-ion batteries, where it represents just under 50% of the battery metals required in those products), which raised just $12.9 million in the September quarter.

Uranium explorers — another hot item at present — brought in $25.3 million by way of fresh capital and, while the phosphate sector hauled in $24 million, the potash sector is not represented in the BDO tally.

‘Not surprising’ that gold has returned to dominance, lithium resilient

Initial public offerings were down over the three-month period, with 12 companies completing their floats against 29 IPOs that got away in the June quarter.

BDO noted that gold’s top showing in the capital raising stakes reinforced its appeal as a safe haven in times of financial stress.

“It is not surprising that gold has returned to dominance, especially now that capital markets have stalled in many advanced economies and inflation is firmly entrenched.”

BDO also pointed out that lithium had proved to be “markedly” resilient to the price shocks that have recently rocked commodity markets “which we attribute to original equipment manufacturers’ frenzied pursuit of offtake agreements from lithium producers”.