Rising Trends in Costs and IPOs: Canaccord’s Howard at RIU
THE CONFERENCE CALLER: Although costs are rising, Australia remains the cheapest place to build a gold mine, according to data Canaccord Genuity senior mining analyst Paul Howard showed the RIU Explorers Conference. By Ngaire McDiarmid
Speaking to a standing room only crowd on the opening day of the conference, Howard put this down to efficiencies and localised skills.
Howard ran through his market update, saying the number of deals were on the rise with more than 3,500 done in equity capital markets raising $54 billion over the past 10 years.
There had been a similar increase in IPOs, with more than 1000 on the ASX in the same period and 41 per cent of those in the resources and related services sector.
And if it seemed there was an increase in lithium offerings, Howard said his data backed it up with the number of lithium IPOs doubling from 10 per cent in 2021 to 20 per cent in 2022.
“There’s been a big increase in EV-related IPOs,” he told Resources Roadhouse on the sidelines.
“Lithium’s a big part but things like rare earths and … critical metals are really on the increase.”
However, IPO performance dipped from an average 36 per cent in 2021 to 6 per cent in 2022, which “probably highlights the reason you might want to have a diverse portfolio,” Howard told delegates.
The industry’s exploration spend was on the rise, but wasn’t back to 2012 boom levels, he said.
Howard’s close look at the gold sector showed a rising trend in the both the number of mining studies produced and costs involved.
He said there had been 725 studies put out by gold companies since 2003 and put the increasing number of studies down to commodity prices rising and old projects being dusted off.
Source: Canaccord Genuity
“We are undertaking more mining studies; mines are getting more expensive to build and are generally smaller as we go deeper,” he said.
Capex was on average increasing by nine per cent from PFS to DFS level, and mine builds showed an average overspend of 12 per cent – except in Africa which came in under budget – according to the companies he assessed.
“So don’t despair – if you’re building a project and you’re going over budget, everyone else would appear to be as well,” he said.
All in sustaining costs were also rising in the gold sector and Howard said cash generation was anecdotally falling, which he said was probably down to more dividends, merger and acquisition activity and non-sustaining costs.