The beneficiaries have been companies like De Grey Mining and Chalice Mining, which have seen their market capitalisations rise after firming up major new projects in WA, from about $50 million to over $2 billion and $3 billion respectively.
Chalice appears poised to make history as the first explorer to join Australia’s primary stock market index, the ASX200, when it is rebalanced this month.
Chalice Mining managing director Alex Dorsch said he believed his company’s market momentum was due to the location and scale of the discovery at its nickel, copper and palladium Julimar project about 70 kilometres north-east of Perth, and the attractiveness of those metals for new energy technologies.
“It is very hard to look at an exploration project and put a value on it because it is not as simple as analysing a company that is generating cashflow,” Mr Dorsch said.
“I think the market is valuing us where they are because they understand the strategic significance of what we have found, and the scale of it.”
The challenge for Dorsch and his team will be maximising value from the project, whether that is through bringing it into production themselves or striking a deal with a larger company keen to take it over.
Dorsch says it is clear “the discoveries of today are the potential acquisitions of the bigger players tomorrow” but Chalice would not consider any approaches before having a clear understanding of what it is sitting on. And to do that, it will keep drilling.
While service and equipment providers are revelling in the surge in exploration, it is creating painful shortages for some companies.
BDO’s global head of natural resources Sherif Andrawes said there were challenges with rig availability, backlogs in laboratories and “a sector-wide shortage of skilled labour”.
“Although we expect that exploration activity will continue to grow in light of strong cash balances and the higher number of listed exploration companies, the extent of exploration spending growth will be limited by the availability of resources, particularly in relation to drilling services and assay testing,” he said.
Chalice’s Mr Dorsch said the company had noticed some of the constraints first hand.
“When we made our discovery in March 2020 you could get assays under two weeks from the labs because they were pretty quiet and there were drill rigs everywhere around WA and people were staring down the barrel of being laid off,” he said.
“By about July we saw a pretty noticeable uptick in the general market sentiment and an early pinch on the labour market.”
Mr Widdup said he expected current levels of activity in exploration to continue for at least 12 months, but did not believe a skills shortage would be what ultimately halted momentum.
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