Gold and Lithium lead Capital Raising Revival

THE CONFERENCE CALLER: BDO partner natural resources James Mooney provided delegates at the 2016 RIU Sydney Resources Round-up with some thought-provoking insights into the fund raising activities of the junior sector for the first quarter of 2016.

Since 2013, BDO has been providing analysis in regards to the cash positions of exploration companies.

When it first began there were over 860 companies that qualified for the firm’s definition of an explorer, a number which has dropped to just over 740 today.

“As you would expect investor sentiment is very much going towards those companies that are in production, especially the traditional favourites such as gold,” Mooney told the conference delegates.

“But we are also seeing some interesting developments in the junior end of town…which we feel is quite positive.”

BDO’s most recent analysis included a look at capital raisings conducted by ASX-listed companies within the materials and energy sectors for the first three months of 2016.

This concluded that 198 companies raised capital amounting to approximately $579 million during this time.

Of particular note was the size of the capital raisings involved with over 90 per cent raising less than $5 million, with only five capital raisings over $20 million.

These were primarily private placements with right issues being second highest contributor.

“During Q3 2016, private placements was the most popular means of raising capital, with over 113 of the capital raisings completed via private placements,” Mooney said.

“The second most popular type of capital raising was through the issue of rights which made up of 41 of the total raisings announced in Q3 2016.

“Several companies announced capital raising programs through via debt through the issue of convertible notes.”

Diversified Metals and Mining contributed approximately 63 per cent of the capital raisings, with the new market darling of lithium playing a major role in waking up what has been of late a stagnant market.

Approximately 22 per cent of the capital raisings were conducted by companies focused on the market’s other main driver – that old stalwart gold.

“The interest in lithium companies continues to rise with Pilbara Minerals Limited (ASX: PLS) announcing the largest capital raising for the year 2016,” Mooney said.

“The company announced on 7 April 2016 its plans to raise $100 million through a share placement ($85m) and a share purchase plan ($15m).

“Proceeds from the placement and share purchase plan will be used to accelerate the development of its Pilgangoora lithium-tantalum project.”

January provided the largest capital raising for the quarter from lithium-focused Orocobre Limited (ASX: ORE) announcing its capital raising of $85 million.

February was a busy month with 75 announced capital raising, with the capital raising of $50 million announced by Beadell Resources (ASX: BDR) accounting for approximately one-third of the total amount of capital raisings for that month.

Over 43 per cent of the capital raising value of the quarter was announced in March amounting to $252 million.