We took the thermometer out for a heat check on the market with 10 ASX listed explorers
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Drill rigs are coming at a premium, labs are backed up like a clogged pipe and IPOs are emerging at a rate of knots.
There seems little doubt the exploration sector on the ASX is enjoying buoyant conditions, especially those locked behind Mark McGowan’s Covid wall in West Perth.
According to BDO, in June 2021 financing inflows for exploration companies based on Appendix 5B reports hit a record $2.54 billion since the accountants began tallying the numbers in 2013.
Around 150 new companies and spinouts have already listed on the ASX in 2021.
With the uncertainty of the emergence from the Covid-19 pandemic, inflation and interest rate rises on the cards, the big question now seems to be how long can the bull market run?
We hit up the RIU Resurgence Conference in Perth last week to take a temperature check of the ASX exploration industry, where strong support from equity markets and high commodity prices have driven a bullish mood across the sector.
RIU and Vertical Events founder Stewart McDonald said demand for presenting spots at the conference – his 200th since launching in the year 2000 – was at record levels.
“To give you a bit of an insight, our RIU Explorers Conference in February coming up, had 50 companies apply more than there were spots,” he said. “So most of those are in this show to satisfy the overflow.
“And then we just put out our Sydney show in May and that’s already filled, with 50 on the waiting list. So that’ll tell you the mood’s pretty buoyant.”
McDonald said the 14 2021 IPOs on display at the Westin Hotel last week were the most on record, with the resources industry veteran also seeing a number of new investors enter the field compared to previous mining booms.
“I think it’s different because of where the money’s generated from and low interest rates,” he said. “Because interest rates are low, there’s no benefit in putting your money in the bank to get 0.1%.
“So people were putting their funds into investments, managed investments or themselves. A stat I read last week, (was) CommSec accounts are up something like 36% this year, so people are using their own CommSec accounts to do their own investing.
“And they’re using platforms like yours – Stockhead – and others and conferences like ours to get their information.”
McDonald is cautious on whether the strong performance of the exploration sector will continue, but said demand and sentiment remained strong, particularly for “green metals” like nickel, copper and lithium that go into new world applications like electric vehicles, batteries and wind turbines.
“I don’t want to jinx anything because if you say one thing, tomorrow morning you’ll wake up and there’ll be an overnight crash and the whole world’s going to doom, but I would say we’re going okay,” he said.
“I’d say the greenies and the left and the woke, they want green. So if they want green, that’s lithium, that’s nickel, that’s copper. I mean there’s four tonne of copper in every wind turbine and they think that’s green. So let them think that.”
Greenies and wokeness aside, we put the question to 10 explorers about what it’s like drilling for gold, nickel and copper in this market and how they think things will pan out over the coming months.
Market Cap: $130 million
“When Stavely listed in 2014, we were the only resources sector listing on the ASX and it was pretty bleak at the time, there were no investors, no institutional investors anyways, it was all mums and dads then.
“Now it’s a completely different scenario. Certainly in Western Australia, you can’t get rigs, you can’t get geologists, you can’t get people. You can’t bring people in from Eastern States, you can’t bring people in from Ireland or wherever to take up the slack. And so I feel for people operating in WA.
“In Victoria, a little bit different. People are living in Melbourne because they want to live in Melbourne, they don’t necessarily want to fly in, fly out to WA and they can’t anyway.
“So we’ve to a degree have got a captive workforce, but you know, we need to remain competitive salary-wise, so we keep an eye on that to make sure that they’re happy. There’s a little less pressure in Victoria, but yeah it’s a completely different environment.”
“Now for every boom, there comes a bust, there’s no question about that. You never really know what the catalyst is going to be. Is it going to be interest rates, what is it going to be?
“You just want to make sure that when the music stops here, you find a chair to sit on, which really in our business means you’ve got a few bucks in the bank and you can weather the downturn and come out the other side a little bit maybe leaner, but a little bit fitter too.”
“It’s a really action-packed six months. So we’ve got a resource drill out that we’re completing, we’ve got access to a paddock where we didn’t have access before. That’s the last piece in the puzzle for the resource drill out.
“We’ve got a new discovery at a porphyry called Toora West and we’ve got a big regional exploration program with 19 targets to test so there’s a lot of work and a lot of news.”
Market Cap: $10.7 million
“Probably about 20 years ago, it was quite busy. I think this boom has really been interesting.
“We’ve seen a huge pick-up, people are banging down the door asking, tell me about your project, how can we get involved?
“They’re certainly interested in copper, they’re certainly interested in the battery metals. So yeah, we’ve had a lot of response and a lot of support from investors and shareholders alike.
“People are a little bit more patient now. I think they realise a lot of these things are longer plays, and they’re not as willing to just move their money in and out.
“There’s always going to be those people. But I think the support is they understand now that we’ve got to look deeper for a lot of these deposits, we’ve got to actually do the due diligence, we can’t just get stuff right out of the ground.”
“As far as my opinion, I think this is only going to continue.
“Obviously, there’s quite a drive for a lot of metals, and the demand for copper is just going to continue. So I don’t really see an end anytime soon.
“I think we might see a little dip here and there. And we will ride those little bumps. But I think from now it’s going to continue to grow.”
“First of all, we’re going to do some electromagnetic surveys. We’re going to continue to do some mapping on our ground and rock chip sampling.
“But the other thing is that we are going to do more aircore drilling just to confirm geochemistry in our Green Rocks Project. And then we’ve also got further plans to drill with diamond just to really see if we can intersect what we’ve been looking for this whole time because we’ve got all the evidence.
“And now we just need to do the thinking and put the story together and then just drill, put our money where our mouth is.”
Market Cap: $18.2 million
Location: WA-NT border, near Newcrest’s Tanami gold mine
“In my career, I don’t think I’ve ever seen as much focus on exploration companies as there is now and I don’t see it really changing.
“The world is running out of critical minerals, base metals, gold is getting hard to find in the sort of scale of the deposits that the big guys need. And we are just in this position where we need to find more metal and no matter what you’re exploring for.
“Certainly major Australian commodities like copper, nickel, gold, critical minerals, there’s a lot of enthusiasm.
“There’s a lot of support out there for doing the sort of things you couldn’t fund four or five years ago that people were not even interested in.
“So I think it’s a longer term play on exploration now, and I think people are looking for exposure and probably are happy to be involved for a number of years.”
“Drilling is getting more expensive, but the actual physicals are going up as well.
“There’s more metres in the ground and that’s the real measure, I think we like to see is that there’s boots on the ground, there’s drilling going on, and there’s new data being generated.
“I don’t think that’s going to be the highest number we see in this boom, and most of us would like to see just a continual increase in a steady state.
“But you know, our industry is cyclical, very cyclical, and based on commodity prices.
“So if commodity prices go north, you know, you can look at copper and the electrification story going around the world at the moment, you start seeing real shortages of copper like we are, and nickel, you know, you can see a big boom in those sort of commodities.”
“You’re just about to hit the cyclone season and the hot part of the year. So we’re not actually boots on ground.
“Last week, we finished a major airborne magnetic survey. So we’re compiling all the key data sets, we need to do a major targeting exercise and refining where we’re going to drill and how we’re going to go about testing the series of targets that we’ve generated.
“We’ll do that over the summer months, we’ve got rigs booked for early next year and we’re going to be drilling for the majority of the sort of autumn period through winter. And that’s when you want to be up there, putting metres in the ground.”
Market Cap: $12.2 million
Location: WA, near Laverton
“I think 2014 had one resource IPO for the entire year. We are E79 and we were the 78th in October, and so that must be close to 100 now so that’s 100 new companies that didn’t exist last year.
“I guess the self-limiting side of that is those companies are fighting for the same pool of geologists, field assistants, engineers, labs, and drill personnel, Toyotas and caravans and all the equipment.
“So we’re seeing a little bit of a limit on what we can achieve as an industry purely because there’s just not enough equipment and people to go where it could go.
“There’s so much heat in there at the moment that something to slightly cool it down and maybe make it last a bit longer is maybe not a bad thing.”
“I think there’s always a market for companies that have a very specific idea of what they want to do and how they want to do it.
“With so many IPOs there’s certainly a lot of companies that are just doing their own kind of thing or maybe unfocused or they just want to be within the industry.
“I think there’s always a market for very focused companies. Certainly any time you get record numbers, you have to go down at some point. So it’ll contract a little bit I see at some point.”
“We were very lucky to get one of the hard to find drill rigs, and it started drilling two days ago.
“And so the next six months, we’ll probably spend two to two-and-a-half months drilling and then waiting for the assays and developing the drill plans based on those new results at one of our projects.
“On the other project, we’ll be working up those targets for when the drill rig becomes available again.”
Market Cap: $355 million
Location: WA, near Leonora
“It’s way up there in terms of the amount of work being done in the field, and the amount of money that companies have raised.
“It’s definitely right at the top, so I haven’t seen anything as big as this ever. Given there’s about 100 new listings this year, a lot of money has been raised, all that money is going in the ground, plus all the bigger companies have raised money.
“There’s billions of dollars going into the ground. All that work going into the ground will reveal new discoveries, for sure, and we are seeing that.”
“I think next 12 months seems pretty rosy and clearly people that have raised money will keep that going.
“They won’t run out of money next year. In the future, some of those newer companies will have to raise as well as some of the existing ones but nevertheless, at the moment it seems pretty rosy.”
“We’ve been allocating our funds to drilling and we’ll continue drilling mainly because we got some very thick high-grade intersections at Lady Julie.
“It’s only been in recent announcements, we’ve hit 40 metre intersections between two and four grams per tonne.
“So they’re pretty outstanding areas. So we’ll be pulling those up and at the same time we’ll be talking to our neighbours to discuss some of our results.”
Market Cap: $9.7 million
Location: WA, Kalgoorlie
“Is there something more than overcooked? It’s crazy. I haven’t seen anything like this in 30 years. So 2010-11 was really busy. But there is much more stuff going on.
“I think we listed Miramar in October last year and there’s been like 100 floats since then. Everyone wants to do work.
“But you know, it’s hard to get drill rigs, it’s hard to move people around. Lab turnaround times have blown out to like 8, 9, 10 weeks.
“It’s actually quite hard to do business. It’s great that people are doing lots of exploration, but it’s just so crowded at the moment. I guess that’s the only way to describe it.”
“I think it’s gonna keep going. I don’t know how, but I think it’s gonna keep going.
“Gold is going well and people are still making discoveries too.
People like De Grey (ASX:DEG) can go out there, find a great discovery over 12 months and show shareholders what value you can get from a discovery like that.
“While people are making discoveries, people want to invest in stuff.
“Every year people are surprised when explorers make discoveries. I’m not, you’ve just got to get out there and get on the ground.
“And if you can pick up a bit of ground and you’ve got a slightly different idea than the last guy, then there’s every reason that you can make a discovery. So yeah, I think it’s going to keep going probably for at least another 12 months.”
“We just put out some results from one of our projects today, Glandore, that’s looking really good. And we’re doing another aircore program at Gidji, which we’ll finish up just before the Christmas break.
“So next year, hopefully is about consolidating on those and then going to the next step, which is RC and diamond drilling.
“This time next year, I’d like to be in a position where we’ve sort of outlined one or two deposits. I’m not saying a resource, but outlining something that looks like a deposit that we can drill out so we’re gonna have a pretty busy year for if we want to do that.”
Market Cap: $56.2 million
Location: WA, Sandstone
“Obviously the industry is cyclical but right now explorers are being rewarded for being aggressive and going out there and drilling.
“There’s a lot of risk money out there rewarding those groups that are prepared to get as many rigs on site as possible and drill these prospects.
“With some of the new discoveries that are coming through such as (Chalice’s) Julimar, it just highlights there’s so much more to be found and that’s only found by drilling.”
“As I said, these things are always in cycles, (but) I think we might be in a much bigger cycle.
“I think the outlook is all very bullish for commodities, with the EV side and then you obviously have the counter to that with gold.
“For us, gold has been sort of creeping up over a number of years, and the gold price has gone up quite strongly. And we see that continuing with the amount of support there is in the market.”
“We just raised $7 million bucks. We’ve got a resource update coming out the first quarter of next year and that funding will enable us to get rigs back on site I would say sort of around mid-Feb.
“We drilled 60,000m last year, so a really aggressive program; we had three rigs on site. The objective is to drill more than 60,000m in 2022.
“We’ve had some fantastic results from sandstone so if we can look to repeat that it’s great. The market’s responding to it, investors like what we’re doing so we’ll just continue to drill.”
Market Cap: $10.2 million
Location: WA, Kalgoorlie
“Certainly in the battery metal space and the nickel market, pretty good for us.
“We’re certainly going to be pushing ahead with a lot of nickel exploration in the next 12 months. Obviously, gold’s eased off a bit, but I’m expecting a resurgence in in that as well.”
“Nickel sulphide in particular is likely to be strong for a long time due to the battery metals thematic, I haven’t heard any anyone down talk this at all.
“You have all the big companies putting their money behind it as well. Companies like BHP are having a resurgence in the Leinster operations and things like that, pushing ahead with their sulphate production.
“It’s all positives and it filters all the way down to the junior end.”
“Over the last 12 months we’ve done over 40,000m of aircore.
“So I guess we’ve pushed a lot of our projects and advanced them to the stage where we’ve got to drill deeper and closer space drilling with RC and more focused drilling.
“And the nickel project at Berehaven there we’ll be focused nickel exploration along targeted stratigraphic horizons and a fair bit of EM.”
Market Cap: $7.8 million
Location: WA & Queensland
“It’s tough for the companies are already listed that haven’t made that discovery yet.
“If you’ve made a discovery, and we hope that we’re on the tip of that, we’re eternal optimists, things are much easier.
“You make the discovery a few weeks later, the share price has doubled. You can raise money, and you can raise money at double the price and issue half the number of shares.
“In our case, we’re always trying to minimise the number of shares on issue, doing the right thing by initial shareholders because they don’t want to get diluted down.
“We’re moving more into the green metals, we’ve always been in nickel, we’re picking up more nickel rights around us, we’ve just done a deal with (gold explorer) Yandal.”
“Well, I’m not sure about gold, it’s a hard one to know about. But I’ve got no doubt about nickel, PGEs, lithium, cobalt and copper, metals for electric vehicles.”
“We’re ramping up our nickel exploration at Kalgoorlie and taking on some new projects.
“We’ve acquired those through (consultants) Whistlepipe, one’s a geologist and one’s a geophysicist and they did a lot of the target generation for Gonneville, for the Julimar PGE, nickel, copper, cobalt project.
“We met them at IGO about six years ago, when we were farming into Empress Springs and Burracoppin, they’re very smart geos.
“We’ve done a deal with them, they get a few shares upfront, and they’ll be giving us some high level consultancy to help guide us.”
Market cap: $122.5m
Commodity: Rare earths/nickel/base metals
Location: WA, Gascoyne/Kimberley/Goldfields
“It’s been a very strong two years between exploration successes with De Grey, Liontown, the Julimars, Bellevue.
“The market’s really seen for the first time I think in a long time, a lot of bang for buck in the exploration space, and with the demand for metals continuing to increase the perfect storm has sort of come together.
“I think we’re going to see continued support as long as the industry continues to deliver those drill programs and those discoveries for the metals that we need.”
“I think that’s well beyond my pay grade to comment on. But I think that as long as the population continues to grow, and we see growth, and we start to pivot into these new energies, sort of transformations with electric vehicles, electric energy, a low carbon future is one built on mining.
“And that’s going to require the funds to go into it and the continued exploration success.”
“Over the next few months, we’re focused on a rare earths discovery that we’ve just started to unravel next to Hastings’ Yangibana project in the Gascoyne.
“And we also have a nickel project, which we’ve already joint venture with First Quantum. So electric vehicles, nickel, rare earths batteries it’s fantastic in that regard.
“And then we also have our Kimberley project, which we’ve just finished a drill program on and delivered some high grade copper-cobalt mineralisation up there.
“So I think the next 12 months is really seeing Dreadnought deliver on the resources that the new world needs for the commodities that are for that low carbon future.”
At Stockhead, we tell it like it is. While Moho Resources, Metal Hawk, Miramar Resources and Magnetic Resources are Stockhead advertisers, they did not sponsor this article.