ADELAIDENOW.COM.AU
South Australia’s exploration companies are taking advantage of an upswing in sentiment to raise cash
APRIL 07, 2018
MANY of the state’s junior resources companies are set to capitalise on the improved appetite for equity investment to meet their immediate cash needs.
A number of them last month lodged financial results with the Australian Securities Exchange, including Argonaut Resources, which revealed cash resources of less than $1 million at the end of December were insufficient.
Argonaut is exploring for “in-flavour” cobalt in Zambia, besides iron and other traditional minerals in SA.
Its directors were confident in their ability to raise capital to fund activities based on past success in raising capital. This included raising $2.4 million in the same half-year period.
The confidence, which is widespread among explorers, comes amid a “growing positive market sentiment” towards the resources sector, audit and advisory firm BDO’s Audit Partner Michael Haydon said.
“There has been an uplift in confidence in general over the past few quarters compared to what the investment appetite was, say, in 2013,” he said.
“We are finding investors are keen to support the sector, especially those that are into in-flavour minerals like lithium and graphite, which are in demand for hi-tech batteries, et cetera. In fact, this extends to institutional support, including from overseas.”
Lincoln Minerals, which is close to developing its Kookaburra Gully graphite project northwest of Port Lincoln, raised $3.7 million to the end of December.
It has shareholder approval to raise at least $12 million when it decides to do so.
SA’s newest resource listing, Northern Cobalt, this week extended its share purchase plan, targeting $1 million, so that shareholders can “appraise new information” on its flagship Stanton cobalt deposit in the Northern Territory.
It comes after the company raised $3 million earlier this year from a heavily oversubscribed share placement to professional and sophisticated investors.
The company listed on the market on September 20 through a $4.2 million initial public offering.
BDO’s report on the cash position of ASX-listed explorers for the September 2017 quarter (based on quarterly Appendix 5B reports lodged with the ASX) reaffirmed speculation that the industry is primed for further growth in the coming periods.
“Among our SA exploration clients, we are seeing projects being revisited and the exploration expenditure is at levels we haven’t seen in a while,” it says.
BDO said it had been involved in a number of transactions in December – traditionally a slow period – which indicated a more robust quarter when compared to previous years.
Baker Young stockbroker Steven Weinmann also said equity markets were less sceptical and more open to supporting “good projects”.
Copper, energy and oil and gas projects were also among those well supported.
“Capital markets are more open to providing exploration companies with support for further studies, including as we have seen in the case of Strike Energy (exploring WA’s Perth Basin for oil),” Mr Weinmann said.
“Exploration investment is long-term though and patient investors could reap good returns – for instance, investors in Cooper Energy would be pleased with how far that company has gone.”
The Adelaide company is developing the Casino Henry gas project off the Victorian coast and owns the Sole gas field, which is being developed to provide a new source of gas supply to southeast Australia in 2019.
SA uranium mine owner Boss Resources has just raised $8 million through a placement.
The money will be used for a definitive feasibility study to support the restart of the Honeymoon mining operation, 75km northwest of Broken Hill, which it has owned since December 2015.
It has also appointed Tribeca Investment Partners, which is also an institutional investor in Boss, to raise another $US65 million ($85 million).
Explorer Core Exploration recently raised $4 million for its Grants Lithium project, near Darwin, NT.
It is targeting production in late 2019 with a preliminary feasibility study close to completion.
While junior miners are accustomed to running leaner operations and short cashflow runs, Mr Haydon cautioned investors against “zombie exploration companies”.
These are companies that have stopped exploring or don’t have any promising projects and are seeking funding just to keep going.
“Investors need to ensure they are aware of who and what they are investing in. There are companies that are simply struggling zombie explorers so due diligence is important.”
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