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BDO talks investor concerns around environmental and social governance in exploration

One of the world’s leading accountancy and advisory organisations, BDO offers insight into upcoming trends in mining exploration.

The pension pool in Australia is expected to reach $9.5 trillion by 2035
The pension pool in Australia is expected to reach $9.5 trillion by 2035

BDO Australian corporate finance partner Adam Myers offered a unique insight into the market conditions facing explorers in Australia and internationally while addressing the RIU Explorers Conference in Fremantle.

Myers said that in Australia we were seeing a slight upwards trend in exploration expenditure reflecting strong prices for some commodities.

He said: “We’re seeing positive signs in the Australian market, but it’s not spread evenly, there’s a distinct bias towards certain commodities.”

In September 2019, 31 companies raised $10 million or more and of those 10 were in gold, five were in oil and gas, and four in lithium.

Myers said: “Gold had a very strong September quarter, followed by oil and gas but it’s tough for a number of commodities out there.

“What we learned internationally is that it’s important to take a long-term view of the supply and demand dynamics of some of these commodities.”

Australian investment overseas

Myers said that Australia had a very active pension pool at the moment which could provide a platform for investment internationally.

He said: “In 2019 it was at $2.6 trillion and that’s forecast to reach $9.5 trillion by 2035, which is greater than the market cap of the ASX.

“We will need to look internationally for new assets in the future and there will be a slice of the pension available for explorers.

“I think that provides a great platform for Australian investment in overseas assets.”

Canadian and UK markets

Looking at international markets, Myers said conversations with institutional investors and Canadian companies indicated that capital raising conditions were tough and many had retreated from the junior space

He said: “Investors are targeting producing assets, but most of those producers were flush with cash and didn’t need the money.

“Cannabis stocks and crypto have drawn away investment that might have otherwise gone to exploration.”

In Canada, environmental and social governance (ESG) is a key concern for many institutional investors, which he said was a growing trend globally.

Myers said: “They can’t invest in things that don’t have strong ESG, particularly with oil and gas projects.

“Pipelines in Canada are really having trouble getting approved as investors are very conscious of those sorts of issues.”

Myers said that London-based investors also illustrated the overarching theme of ESG as well.

He said: “They really want to verify ESG, they don’t want to be associated with companies with poor corporate image.”

2023 global predictions

Looking forward, there’s a push for miners to be an open book, to be fully transparent to the public around ESG.

Myers said: “It couldn’t have been louder and clearer that verified ESG is going to be the minimum standard.

“People really want to see open books by the explorers and producers and want to understand where the overall commodity fits into future production outlook and where their money is going.”

BDO also predicts there will be a rare earths arms race in the near-term.

Myers said: “It’s a tightly held space and there’s a lot of concentration in China.

“We think that a lot of countries will see that as a strategic area where they must secure their own supply and control over.”

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