BDO Australian corporate finance partner Adam Myers offered a unique insight into the market conditions facing explorers in Australia and internationally while addressing the RIU Explorers Conference in Fremantle.
Myers said that in Australia we were seeing a slight upwards trend in exploration expenditure reflecting strong prices for some commodities.
He said: “Were seeing positive signs in the Australian market, but its not spread evenly, theres a distinct bias towards certain commodities.”
In September 2019, 31 companies raised $10 million or more and of those 10 were in gold, five were in oil and gas, and four in lithium.
Myers said: “Gold had a very strong September quarter, followed by oil and gas but its tough for a number of commodities out there.
“What we learned internationally is that its important to take a long-term view of the supply and demand dynamics of some of these commodities.”
Australian investment overseas
Myers said that Australia had a very active pension pool at the moment which could provide a platform for investment internationally.
He said: “In 2019 it was at $2.6 trillion and thats forecast to reach $9.5 trillion by 2035, which is greater than the market cap of the ASX.
“We will need to look internationally for new assets in the future and there will be a slice of the pension available for explorers.
“I think that provides a great platform for Australian investment in overseas assets.”
Canadian and UK markets
Looking at international markets, Myers said conversations with institutional investors and Canadian companies indicated that capital raising conditions were tough and many had retreated from the junior space
He said: “Investors are targeting producing assets, but most of those producers were flush with cash and didnt need the money.
“Cannabis stocks and crypto have drawn away investment that might have otherwise gone to exploration.”
In Canada, environmental and social governance (ESG) is a key concern for many institutional investors, which he said was a growing trend globally.
Myers said: “They cant invest in things that dont have strong ESG, particularly with oil and gas projects.
“Pipelines in Canada are really having trouble getting approved as investors are very conscious of those sorts of issues.”
Myers said that London-based investors also illustrated the overarching theme of ESG as well.
He said: “They really want to verify ERead More – Source