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Consolidation imminent for resources explorers, developers as Deloitte SA Index hits lowest level in three years

20 October 2015: The Deloitte South Australian (SA) ASX Index increased by 2.1% in the 2015 September quarter, but still hit its lowest level in three years in August.

The total market capitalisation of the state’s 64 listed companies decreased by $3.26bn (-15.5%), from $21.03bn in the June quarter to $17.77bn.

Deloitte Corporate Finance Partner Stephen Adams said: “The Deloitte SA Index was stronger on a quarter-to-quarter basis, but also reached its equal lowest level during the last quarter since September 2012."

By comparison, the S&P/ASX 200 Index decreased by 8.0% in the 2015 September quarter.

Over the 12 months to 30 September 2015, the Deloitte Index decreased 9.7%, weighed down by falls in Santos’ market capitalisation, while the ASX 200 decreased by only 5.1%.

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Adams said the current environment for resources operators also suggests we are at an inflection point for many of the Index’s explorers and developers.

“Consolidation amongst companies now seems imminent in the sector. We have seen a general exhaustion of non-core asset sale opportunities and a persistence of tight equity capital market conditions,” he said.

“But those that have successfully reduced their costs and improved productivity to make them more resilient and agile will be looking to growth via those that have been slow to respond to change.

“Current conditions for explorers and developers will force consideration of innovative structures that will reduce administration and overhead costs and allow deployment of more capital to exploration and development activities – potentially disrupting the historical operating and funding structure applied by listed exploration and development companies.

“South Australian exporters, particularly those that have invested in research and development in the previously high exchange rate environment should also see benefits start to flow through as the Australian dollar starts to settle in the US$0.60-0.70 range.”

Major SA ASX company movements

SeaLink Travel Group Limited was the largest positive contributor to the Index, with its share price increasing by 44.3%, and market capitalisation to $293.3m.

On an absolute share price performance basis, and in addition to SeaLink, the companies that recorded the largest percentage share price increases in the September 2015 quarter were:

  • Crest Minerals Limited – up 250.0% (market capitalisation of $3.2m)
  • Thor Mining PLC – up 100.0% (market capitalisation of $2.9m)

Companies recording the largest percentage share price decreases were:

  • Beach Energy Limited – down 56.0% (market capitalisation of $601.9m)
  • Tychean Resources Limited – down 50.0% (market capitalisation of $2.5m)
  • Santos Limited – down 49.0% (market capitalisation of $4,010m)

IPOs, Index Additions and Removals

Four companies were added to the Index in the September 2015 quarter:

  • Argo Global listed Infrastructure Limited (IPO)
  • Beston Global Food Company Limited (IPO)
  • OZ Minerals Limited (relocated from Victoria)
  • iBosses Corporation Limited (IPO)

Three companies left the Index:

  • Animoca Brands Corporation Limited (relocated to New South Wales)
  • IMX Resources Limited (relocated to Western Australia)
  • Brand New Vintage Limited (relocated to Western Australia)

Download the Deloitte SA Index with a full company-by-company breakdown.

Deloitte analysis, ASX, Capital IQ
Percentage change to 30 September 2015. Source: Deloitte analysis, ASX, Capital IQ

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