Investors poured $2.4bn into ASX mining juniors last year – a jump of 60pc
Mining & Resources
Show me the money! ... Pic: Jerry Maguire
Investors flooded back into the small cap resources sector last year, plonking $2.4 billion into emerging ASX explorers — a 60 per cent increase on the $1.5 billion invested the year before.
Stockhead’s resident data guru Nicholas Sundich reviewed every ASX capital raising over the past two financial years for hard rock resources stocks with a market cap of $400 million or less.
The number of capital raisings in the junior mining sector jumped from 322 to 430 while the average value increased from $4.3 million to $5.5 million.
And so far this financial year juniors have already raised almost $1.3 billion from 80 capital raisings, the data shows.
The numbers tally with a widespread view that the resources sector is continuing to recover from its recent downturn.
Exploration spending across Australia grew by 28 per cent – or $125 million — to $563 million in the June quarter alone, according to data from the Bureau of Statistics.
Nationally, money spent on greenfields (or untouched) exploration projects jumped by 37 per cent or $54 million, while spending on brownfields (previously explored or mined) exploration rose 24 per cent, or $71 million.
While the market had been softer in the past three months, capital raising trends had corresponded with an uptick in exploration, said the chief of junior mining investor Lion Selection Group, Hedley Widdup.
“The recapitalisation that we saw in 2016, 2017 and into 2018 – although perhaps conditions are a little bit harder now – positions the industry to spend money,” he said.
Conglomerate Gold and Battery Metals
One of the high-profile areas capturing investor interest has been battery commodities – with graphite, cobalt, lithium and rare earths all captured in this thematic, Mr Widdup said.
“That has certainly provoked several capital raisings, and there has been a lot of strong [share price] performance in that space as well,” he said.
Notable ASX battery-focused small cap raisings over the past year include cobalt explorer Aeon Metals ($30m), lithium explorer and developer Global Geoscience ($30m), cobalt explorer and developer European Cobalt ($20m), and Altura Mining ($26m) — which is already looking to double production at its Pilgangoora lithium mine.
Companies searching for conglomerate hosted gold in the Pilbara over the past 12 months have also been a strong, evolving story, Hedley said.
The capitalisation of Canada-listed Novo Resources, which is searching for conglomerate hosted gold in the Pilbara, reached a peak of $1.2 billion in October last year – when it had no resources and was yet to drill.
But it corresponded with a massive renewed interest in the market for investing in exploration companies.
“If you were to look at companies that report to the ASX on an Appendix 5b – which means they basically don’t have cashflow, they must raise cash – the quarterly trends with them raising money corresponded very closely with that story in the Pilbara,” Mr Widdup said.
“As a result, in the last quarter of calendar year 2017 there was quite a reasonable amount of money raised for exploration by those [conglomerate gold-focused] companies generally.
“It basically points to the idea that if you have a big concept which comes into the market – like conglomerate gold or battery metals – capital raisings [can be successful].
“Those are the things that have excited investors in the bottom end of the market.”
Here’s a list of 20 major capital raisings by ASX-listed mining juniors in 2017-18:
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