Australian equity markets raised more money for mining companies than any other markets last year, excepting the Toronto exchanges.
Total money raised in 2022 was down significantly across the board when set against 2021, but Toronto remained the clear number one, having secured US$4.9bn for the world’s miners, with Australia securing a comfortable second place by bringing in US$4.2bn.
Trailing a distant third and fourth were the US exchanges, with US$700mln, and London, with US$440mln.
Australia’s position in second place after Canada isn’t new – Canada and Australia have been number one and number two for the last eight years.
But last year, when commodities markets were weak, Australia held its’ end up pretty well - although the US$4.2bn raised in 2022 was lower than the totals both for 2020 and 2021, it was nevertheless the third highest total in the previous eight years.
So, the trend remains resolutely up. And in that bumper 2021 year, at US$8.5bn raised, the ASX wasa only slightly behind the TSE’s US$8.7bn.
What will 2023 bring?
Well, the signs so far are that the Australian markets are alive and kicking.
There’s activity in Canada too, although London is quiet, and New York, as ever, remains hard to read from the mining perspective.
Australia, though, currently has several factors in its favour.
The first is that, unlike London, and to an extent the US, it’s not just a hub for finance. In a manner that’s more similar to Canada, it’s also a genuine centre of hands-on mining expertise, and is one of the world’s most richly endowed countries from a commodities perspective.
There’s huge amounts of gold, nickel and copper in Australia, not to mention uranium and cobalt. It’s also the world’s top producer of lithium, as of 2022.
Australia is thus well endowed both with the metals of the past, and with the metals of the future.
The next big factor that favours Australia is its proximity and to the world’s major commodities customer, China.
Things haven’t always been plain sailing in the relationship between China and Australia. China has cities with larger populations than the whole of Australia, and the disparities in size and power do occasionally get commented on. On the other hand, Australia, to a degree, has a better relationship with the truth, and wasn’t shy about asking the questions of China about covid that other more obsequious countries avoided.
Be that as it may, China is now largely moving on from covid, and China’s re-opening has been to Australia’s benefit. And not just in regard to the mining sector, but more broadly. The Australian government reckons it will run a budget surplus in the year to June, and most commentators put that down to the uplift that China’s re-opening has delivered.
In case anyone’s interested, the last time the UK government ran a surplus was in fiscal 2000-2001, and it certainly doesn’t look like running another one any time soon.
Still, not everyone is delighted with the performance of the Australian economy. Australia’s richest woman, the mining mogul Gina Rhinehart, argued recently, in a talk given to the Queensland Resources Media Club, that the government owes its strong financial position to the mining industry and that it should acknowledge that debt.
In fact, the current government tilts broadly against mining and in favour of an environmental agenda, although having said that, it has just approved a new coal mine. All the same, not many people expect the budget surplus to be sustained for long, especially as the outlook for the Australian mining industry itself is decidedly mixed.
The high gold price is sustaining a broad level of optimism in certain quarters, and has set a favourable backdrop for the recent acquisition of Australia’s largest gold company, Newcrest, by one of the world’s overall largest, Newmont.
And exploration spend locally remains high.
Drilling activity hit a decade high in 2022, and Australia is comfortably the second largest exploration destination in the world behind – guess who? – Canada. Around A$2.3bn was spent inside Australia on exploration in 2022, up from the A$1.9bn spent in 2021, that year of bumper financings.
On the other hand, inflation remains an issue, the iron ore price is dropping, prices of some base metals are comparatively weak, and there are carbon and other ESG issues to contend with in a way that just wasn’t there a decade or two ago.
No-one now will forget the way Rio Tinto dynamited a sacred aboriginal cave at the Juukan Gorge a couple of years ago. But how many other such instances occurred in the past that never went reported?
Maybe we’ll never know. Or maybe we’ll find out in a series of leaks that damage the industry for years to come.
All that being said, the money continues to be available in Australia, and Australian companies continue to secure it.
At the time of writing, Calidus is just completing a A$28mln raise for its Warrawoona gold project in the Pilbara, and Sunstone Metals raising A$12mln for its project in Ecuador.
There’s speculation that Greatland will seek capital in Australia when it next needs to. Group 6 is raising A$30mln for tungsten in Tasmania, Galan Lithium is looking to put together a big raise for a project in Argentina, and back in February Dreadnought Resources raised just over A$21mln for a rare earths project.
This is just a snapshot, but even so it serves to illustrate a market that looks to be functioning well and responding to the pressures it faces.
As to the future?
Worth noting that Andrew Forrest, the driving force behind the iron ore giant Fortescue Metals, is now also Australia’s biggest renewables investor. Fortescue itself has set net zero targets, and ESG reporting is now pretty much standard across the board.
This may be an industry that’s slow to change, but change is nevertheless coming. And it’ll come first either in Canada, or in Australia.