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Mine prospectingbooms among cashed-up explorers

Exploration spending in the resources sector in the last threemonths of 2023 was the best December quarter in 10 years, as prospecting forclean energy metals remained robust despite market jitters over lower EV demandfrom China.

The December-quarter figures, compiled by advisory firm BDO andspanning companies purely in the exploration phase not yet earning revenue,show the strongest December quarter since 2013, revealing a high appetite forrisk in the market.

The 23 per cent increase in companies spending between $100,000and $300,000 on exploration compared with the previous quarter reflectedencouraging signs for the mining sector, said Sherif Andrawes, BDO’s globalnatural resources boss.

Total exploration expenditure was $1.01 billion in the currentquarter, marking the highest of the 2023 calendar year,” Mr Andrawes said.Spending on exploration was driven higher because the number of companies withmore than $1 million in their coffers is unusually high, data from the reportshows.

Clean energy metals such as lithium, nickel, copper and cobaltmade up the top 10 exploration spends alongside gold and hydrocarbons. Thisincluded three lithium prospectors and three gas companies. The gas companiesoccupied the top five spends, the BDO data shows.

Battery minerals sitting alongsideoil and gas in the top 10 exploration spends aligns with the view that gas willbe among the last fossil fuels phased out in the energy transition, Mr Andrawesobserved.

He said long-term demand for lithium underpinned robustexploration in the December quarter, despite prices for lithium plunging.Prices have dropped 80 per cent from their cyclical peak due to soft demand for electric vehicles in China, but haveregained some ground this year.

“This indicates that recent price declines for lithium are morea function of short to medium-term demand and supply imbalances driven byslower-than-anticipated electric vehicle demand.”

The year of rationalisation’

Nick Rathjen, chief executive andmanaging director of listed junior explorer Future Battery Minerals, said theappetite for lithium exploration was hot last quarter because quality assetsare still worth searching for due to long-term demand.

But he said he expects 2024 to be “theyear of rationalisation” and exploration spend will likely drop, thoughhigh-quality projects will still be sought out by prospectors.

Explorers raised $2.68 billion in theDecember quarter, a 32 per cent increase from the three months to September,according to BDO. Lithium prospectors led the pack despite the price of thebattery commodity collapsing.

Mr Rathjen is in the middle of a capital raiseto fund his “opportunistic” acquisition of the Miriam lithium plot, which is located north of FBM’s flagship Kangaroo Hills lithium asset. “We think there’s no better time to do that. Lithium has gone through a turbulent time [and there is no better time to buy].”

The period over the last six months shows prices have fallen tounsustainable price levels. That’s only a short-term position, the equilibriumwill come back,” he said. “We’re buying while the assets are cheaper.”

The strong capital raise data comes amid a hotbed of M&A activity led by rich-listers Gina Rinehart raiding Liontown Resources and Chris Ellison moving on Wildcat Resources.

BDO said the December quarter capital raise figure of $2.68billion reflects the smaller pool of cash Liontown raised in March after itsblockbuster $760 million funding deal inked during the December quartercollapsed.

Oil and gas exploration also increased over the Decemberquarter, representing a 33.6 per cent increase from the prior quarter. This waslargely driven by oil and gas players Strike Energy and Tamboran Resources.