Mr Holliday said the boom conditions were manifesting in many ways, including longer waits for drilling results to come back from laboratories.
“It is stretching out here to two months and normally you might expect three weeks or so,” he said.
The laboratory backlog is even more severe in Western Australia, where the state government was last month forced to extend a deadline for Rio Tinto to submit waste rock samples from its Hope Downs 4 iron ore mine because there was no prospect that laboratories in the state would be able to assay the samples before July.
Laboratory giant ALS Limited said this week that the number of samples received had surged by 13 per cent in the three months to December 31.
Longer waits for assay results could slow the speed at which explorers spend their cash bounty on drilling, with Mr Holliday saying geologists ideally wanted to know the results of their last hole before choosing where to drill their next hole.
“That is a problem if you don’t have the assays fairly quickly. You have got to keep drilling, you can’t just stop and slow down because you might lose your contractor,” he said.
WA’s hard border is exacerbating the challenge, with Association of Mining and Exploration Companies (AMEC) chief Warren Pearce saying the drilling sector in WA could use up to 500 extra workers over the next six months.
“The only thing holding us back is the ability to get people and support in key roles, whether that be in drilling and getting rigs on the ground or in the assays and getting results back,” he said.
“There are enough [drill] rigs around but you just can’t get people to get them on site. We’re probably 20 per cent under the capacity we’d have if we could access people.”
Coronavirus lockdowns
Investors’ appetite to support the high-risk work of explorers marks a sharp turnaround from the first three months of 2020 when inflows to the sector slumped to a four-year low, according to data compiled by BDO’s global head of natural resources, Sherif Andrawes.
Mr Pearce said international investors were likely a factor in the surge of investment into the Australian exploration sector, given explorers in other parts of the world were more limited by coronavirus lockdowns.
“Anyone who wanted to put their money into the mining industry and wanted their investment to be secure against the risk of COVID-19 put their money to Australia,” he said.
Toronto-listed Kincora is among those increasing their focus on Australian exploration and is in the process of establishing a dual-listing on the ASX.
S&P Global Markets estimated on Wednesday that spending on mineral exploration globally in 2021, excluding iron ore, could be up to 20 per cent higher than the $US8.7 billion spent in 2020.
‘Demand is enormous’
S&P Global said $US9.8 billion was spent globally on such exploration in 2019.
Drilling company DDH1 Limited listed on the ASX on Tuesday and has its fleet of 96 rigs booked almost solid for the rest of calendar 2021.
DDH1 founder Murray Pollock said mining companies and explorers were starting to panic-book rigs the way households had hoarded toilet paper in the early stages of the pandemic.
“The demand is enormous, we just cannot keep up,” he said.
“I think there is a bit of panic out there and perhaps some companies are booking up rigs [because] they know they have to get in there, but they might not know exactly what they are going to do with them.
“Once that starts it is a bit like the pre-COVID toilet paper rush.”
DDH1 has drilled holes 2000 metres deep at Newcrest Mining and Greatland Gold’s Havieron project in WA and 2500 metres deep at BHP’s Oak Dam in South Australia.
Mr Holliday was working for Newcrest between 1992 and 1996 when he and colleagues including Colin McMillan and Ian Tedder made a series of copper and gold discoveries in Cadia Valley.
He has seen many cycles in the exploration sector and suspects super-low interest rates and high prices for commodities such as copper and gold are fuelling the boom.
“There seems to be this super optimism for investment in things that is probably driven by the fact money costs nothing nowadays,” said Mr Holliday.
“A lot of exploration dollars don’t lead to success, so it will be interesting to see what happens.
“It is a very high-risk game, and I am not personally a big gambler but I seem to be in this gambling industry that quite amazes me at times.”
BDO found that 22 per cent of ASX listed explorers had less than $1 million of cash on hand at December 31, down from 43 per cent when times were tougher in March.
A strong pipeline of initial public offerings saw the number of explorers on the ASX rise from 642 on September 30 to 656 by December 31.
That increase ended a trend in which the ranks of ASX-listed explorers shrank for the previous eight successive quarters.
“The ASX’s current list of upcoming floats, coupled with BDO’s own pipeline of IPOs in progress, suggests that this trend will continue into the coming quarters,” said Mr Andrawes.
