Lithium explorers were able to raise mountains of cash despite sliding prices in the December quarter
\nUranium and gold are ripe for M&A with prices on a positive trend
\nASX explorers spent over $1b drilling in the December quarter<\/p>\n
Figures tabled by accounting and financial services firm BDO show lithium investments remained strong even as prices nosedived in late 2023 with Australian explorers continuing to splash the cash.<\/p>\n
But its global head of natural resources Sherif Andrawes says to keep a lookout for M&A in uranium and gold, two commodities which are catching the eye as prices run ahead of equity valuations.<\/p>\n
\u201cUranium hasn\u2019t been the most popular of commodities for a long time but now with pricing coming back we\u2019ve seen transactions recently like 92 Energy (ASX:92E) just this week. They had their scheme approved with ATHA Energy in Canada,\u201d he told Stockhead<\/em>.<\/p>\n \u201cWe saw A-Cap and Lotus Resources (ASX:LOT)<\/a> at the back end of last year. I think we might see more in the uranium space. <\/p>\n \u201cThat\u2019s certainly going to be something that\u2019s been neglected for a while and I\u2019m surprised we haven\u2019t seen more uranium M&A coming out. <\/p>\n \u201cGold is always there. The current gold price is spectacular, but particularly in the Australian dollar gold price. I think that might just generate a bit more M&A happening and we\u2019re seeing things like Silver Lake (ASX:SLR)<\/a> and Red 5 (ASX:RED)<\/a> at the moment but I think we\u2019ll see more coming up in the near future.\u201d<\/p>\n Lithium prices may have crumbled by almost 90% in 2023, but investors were still backing lith stocks and explorers were still drilling their hard earned into the ground in the December quarter, data from BDO\u2019s Quarterly Explorer Cash Update showed.<\/p>\n Explorers secured $2.68b in funds in the three months to December 31, up 32% on the September quarter, while $1.01b was spent on drilling with a 23% rise in companies spending between $100-300,000.<\/p>\n Up from $993m in the corresponding period in 2022, that\u2019s among the highest quarterly splurges since 2013, with explorers still confident they can head back to investors for more drilling capital.<\/p>\n Explorers have not been shy spending their dosh. Pic: BDO<\/p>\n \u00a0<\/p>\n Even as prices began to slide, LithCos secured $756.39m from investors in the December quarter among the 43 companies which raised more than $10m, outstripping the next highest recipients the gold sector ($484.07m), uranium ($215.88m), graphite ($126.64m) and rare earths ($75m).<\/p>\n That was propelled by Liontown Resources (ASX:LTR)<\/a> and its $389.94m equity raise after Albemarle\u2019s $6.6b deal to acquire the Kathleen Valley lithium mine owner fell through.<\/p>\n A $300m raising from De Grey Mining (ASX:DEG)<\/a> also added some gloss to the gold sector\u2019s numbers as did big capital injections for Boss Energy (ASX:BOE)<\/a> and Syrah (ASX:SYR)<\/a> in uranium and graphite.<\/p>\n But those big equity raisings certainly showed investors had long term outlooks that battery metals demand will remain strong.<\/p>\n While we haven\u2019t seen lower prices trigger a wave of lithium M&A after a rush last year when the industry was at its zenith, Andrawes said most big acquirers (think MinRes, Gina Rinerhart et al.) are taking a long term rather than cyclical approach to investing in the sector.<\/p>\n Lithium explorers still raked in investor cash in December. Pic: BDO<\/p>\n On a calendar year basis lithium explorers hoovered up $1.952b in fresh investment followed by gold ($1.786b), graphite ($494.8m), rare earths ($302.29m) and oil and gas ($272.48m).<\/p>\n The one battery metal that really dropped off investors\u2019 radar, Andrawes said, was nickel, which went from one of the prized pigs of the mining game to a pariah within a year as oversupply of battery grade product from Indonesia halved prices.<\/p>\n \u201cThere\u2019s a difference between each of the battery metals, it\u2019s a very broad category and nickel was probably the worst of them all. It fell in our rankings of fund finders,\u201d he noted.<\/p>\n \u201cEarly in the year it was quite high, but in this particular one, it falls down to the bottom end of it, so it\u2019s probably the laggard in the whole scheme of things whereas lithium was quite different. <\/p>\n \u201cI think there\u2019s a distinction between what\u2019s happening in the short term lithium market and what\u2019s impacting producers compared to what the opportunities are for lithium in the longer term and I think explorers reflect the longer term rather than the short term.\u201d<\/p>\n Lithium and gold were the biggest draws for equity and debt funders in 2023. Pic: BDO<\/p>\n \u00a0<\/p>\n Since returning to a decade high in 2021, resources IPOs have quickly slowed to a trickle, with Andrawes saying BDO\u2019s pre-IPO assessments are largely coming from Canadian companies looking to chase the stronger mining dollar on the ASX.<\/p>\n \u201cThe concern is that the IPOs are coming off. One of the measures I quite like which is most telling is the number of companies there are and there\u2019s a graph we have that shows over the over last 11 years we\u2019ve been doing it the numbers drop off a lot and then cycle back up again,\u201d he said.<\/p>\n \u201cThat\u2019s plateaued in the last year or so.<\/p>\n \u201cI\u2019d love to see that going back up again. It shows that we\u2019re strong but not as strong as we\u2019d like to be.\u201d<\/p>\n Pic: BDO<\/p>\n There were just six exploration IPOs per quarter in 2023, down from 17 in 2022 and 26 in 2021. Four companies were delisted in the December quarter due to takeovers.<\/p>\n But cash balances remain healthy with few exiting due to company collapses, with 77% of companies reporting Appendix 5B statements holding $1m cash or more. That fell to around 45% during the downturn in 2015 and 2016.<\/p>\n <\/span><\/p>\n The post BDO puts uranium, gold M&A on the watchlist as lithium continues to capture investors\u2019 hearts<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"LithCos dominate 2023 fundraisings<\/h2>\n
Will IPOs return?<\/h2>\n