Exploration spending by Australian listed mining companies hit an eight-year high in the fourth quarter of 2021, driven by surging demand for electric car batteries and mining companies looking for new lithium resources, according to foreign media reports.
Australian mining companies invested A $973 million (US $700m) in the fourth quarter of 2021, up 11 per cent from the previous quarter, according to a report by BDO, a consultancy. A record A $3.75 billion has flowed into the sector through equity and bond financing, supporting growth in spending by mining companies.
"this not only continues the trend of spending growth that we have seen in the past three or four quarters, but also a substantial increase," Sherif Andrawes, global head of natural resources at BDO, said in a telephone interview. Australian miners spend more on investment and exploration, while stable access to capital means they can replenish capital, he added.
The prices of a variety of raw materials, such as copper, nickel and iron, have soared on the back of stimulus spending measures by the Australian government to help the economy recover from the epidemic. The Australian mining industry is stepping up its search for new resources to meet strong demand and profit from a strong price environment. However, due to years of underinvestment in this area, the Australian mining industry is catching up.
Cash has poured into the lithium industry as lithium producers scramble to introduce new resources into the lithium industry to help reduce expected supply shortages in the coming years. Lithium resources surpassed gold in attracting capital and received more than A $2 billion in financing in 2021. Liontown Resources, which is currently developing a lithium mining project in Western Australia, raised A $450 million by issuing shares, making it the country's largest single financing in the fourth quarter of 2021.
"now is the best time to develop lithium mines," Andrawes said. He also sees a trend for lithium producers to invest in processing infrastructure to play a broader role in the battery supply chain for electric vehicles. "these companies have positioned themselves not only as a lithium mining company, but also as a supplier of battery products and components for the electric vehicle and renewable energy industries," the report said. "
BDO expects exploration activity to continue to grow, supported by strong capital inflows, while the industry may be affected by resource constraints, travel restrictions related to the novel coronavirus epidemic and a shortage of skilled labour. In the fourth quarter of 2021, about 740 primary miners submitted quarterly cash flow reports to the Australian Exchange, up from 704 in the previous quarter.
