Hunt for battery metals powers Aussie miners to record exploration spend

Despite a fall in seasonally adjusted terms, ABS figures show Aussie miners spent a record $1.0849b on drilling in the September quarter
It eclipses the figure of $1.061b from the June quarter of 2012
Spending on gold exploration fell, but the hunt for electric vehicle metals means lithium and base metals are being sought at record rates

Future facing commodities, EV ingredients, battery metals, critical minerals.

The hunt for the metals crucial to the transition from fossil fuels to electrified transport and renewable energy technology has seen Aussie miners tip more cash into drilling than ever before, breaking a decade long record.

Despite a 1.5% fall in seasonally adjusted terms, figures yesterday from the Australian Bureau of Statistics show the search for copper, lithium, rare earths and other battery metals saw Australian explorers pour $1.0849 billion into the ground in the September quarter.

That was up from $1.0573b in the June term and eclipsed the boom time high of $1.061b set in June 2012.

Behind it all was an unprecedented rise in spending on battery metals exploration, especially important since cash splashed on drilling for gold fell 9.34% quarter on quarter to $382.3m.

While that was still the largest amount spent drilling for any one commodity, gold miners felt the pinch from falling prices and interest rate rises, which dulled investor sentiment in precious metals.

They have since rebounded on hopes a slower and less severe rate hiking cycle will allow investor and safe haven demand to return to bullion.

Explorers spent $157.8m on copper exploration, behind only the December quarter last year ($172.5m) and 17.23% higher than the June quarter, while spending on silver, lead and zinc lifted from $25.1m to $30m.

Drilling for nickel and cobalt fell slightly, but overall the total spend on exploration for ‘selected base metals’, comprising most of the industrial metals now prized for their emerging use in lithium ion battery cathodes, hit a record $267m.

Iron ore investment was steady at $200.1m, little changed from June but almost double the money spent drilling for the bulk metal two springs ago.

But the big mover was “other”, a field which includes commodities like lithium and graphite, where spending rose a massive 36.6% quarter on quarter to $140.7m, and 69.5% up year on year.

And it all makes sense

It jives with data from BDO, which saw cashed up ASX listed explorers punt more than they have in the September quarter since the business advisory firm started collating the data in 2013.

“The demand for future facing minerals of all types is such that we are likely to see increasing amounts raised and spent over the coming few years,” BDO’s global head of natural resources Sherif Andrawes told us last week.

“That will be supported by the ever present interest and demand for gold.”

At the large cap end of the market the growing imbalance between future supplies and demand of the battery commodities has seen those majors invest more than they historically have in exploration.

BHP’s (ASX:BHP) investment in exploration is set to hit US$400 million this year, up from just US$150m a couple years ago, while its Nickel West business in WA will spend more on drilling than at any point since the WMC takeover in 2005.

BHP thinks the nickel market will grow fourfold by 2040, and just put US$9.6 billion on the table in a bid to secure mid-tier copper miner OZ Minerals (ASX:OZL).

And investor interest in lithium is likely to keep growing. A quick look at the IPO pipeline shows a host of companies dabbling in the battery metal are prodding investors for cash to go exploring for the commodity of the moment.

Exploration spending in WA, the largest mining state, hit an all time high of $692.4m, almost 70% of the total, with Queensland seeing its biggest quarterly spend since 2012 at $156m.

Greenfields exploration expenditure rose sharply from $314.4m to $344.9m, with brownfields drilling off slightly to $740m, though explorers are getting less bang for their buck with metres drilled both overall and for brownfields exploration falling as increased driller rates and inflation took their toll.

Metres drilled peaked at 3644km in June 2021, hitting 3048.9km in September 2022 despite expenditure rising $170m over the past year and a quarter.