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23-07-2014, 11:10 PM
Signs of hope as market sentiment turns in favour of smaller explorers
THE AUSTRALIAN JULY 24, 2014 12:00AM
Paul Garvey
Resources Reporter
Perth
THE hundreds of small mining and exploration companies that call Perth home are finally starting to see some fresh signs of hope after the best part of two years in the post-boom wilderness.
Investors appear to be returning to the speculative end of the market, boosting confidence among companies that a fresh round of desperately needed equity funding could be on its way.
The recent surge in share prices at junior explorers such as Thundelarra and Lucapa Diamonds in the wake of exploration success has shown a willingness among investors to reward companies making progress with early-stage projects, a feature that had been absent in recent years.
The subtle shift in sentiment has also been reflected in the share price of minnows such as Segue Resources. Its share price has more than doubled in recent weeks as investors anticipate a start-up in drilling at one of its key projects.
And the market has once again found an appetite for boutique metal of the moment — a phenomenon witnessed numerous times during the mining boom in commodities such as uranium, tungsten and rare earths. This time around the market has found an appetite for graphite, with shares in graphite explorers surging dramatically this year as investors bet that graphite’s use in so-called “green energy” applications could drive up demand.
Morgans analyst James Wilson told The Australian it was clear that sentiment towards the junior end of the resources sector was starting to improve.
While fresh equity funding may finally be starting to flow, Mr Wilson warned that it may come with a down side.
“There’s more risk money about, and that’s a good and bad thing,” he said. “It could be detrimental (to the junior sector) in that those companies who had been forced to think about consolidation, who were being squeezed out of existence and who probably never should have listed in the first place, are possibly hanging on just long enough to get capital to hang around for the next five years.”
The number of listed exploration companies trebled over the past decade to more than 900, and Mr Wilson said there was a need for that number to reduce in order to concentrate the quality of assets on offer to investors.
KPMG head of mining Carl Adams said it had been a tough few years for the sector, but improving prices for several commodities had offered encouragement for smaller miners and explorers.
“That end of the market has been a little bit of doom and gloom but there’s some shoots there. We’re seeing good movement in some prices, be it nickel, aluminium and copper and some other alternative ones as well, so sentiment is getting a bit better,” he said. “My view would be we’ve seen the worst of it.”
THE AUSTRALIAN JULY 24, 2014 12:00AM
Paul Garvey
Resources Reporter
Perth
THE hundreds of small mining and exploration companies that call Perth home are finally starting to see some fresh signs of hope after the best part of two years in the post-boom wilderness.
Investors appear to be returning to the speculative end of the market, boosting confidence among companies that a fresh round of desperately needed equity funding could be on its way.
The recent surge in share prices at junior explorers such as Thundelarra and Lucapa Diamonds in the wake of exploration success has shown a willingness among investors to reward companies making progress with early-stage projects, a feature that had been absent in recent years.
The subtle shift in sentiment has also been reflected in the share price of minnows such as Segue Resources. Its share price has more than doubled in recent weeks as investors anticipate a start-up in drilling at one of its key projects.
And the market has once again found an appetite for boutique metal of the moment — a phenomenon witnessed numerous times during the mining boom in commodities such as uranium, tungsten and rare earths. This time around the market has found an appetite for graphite, with shares in graphite explorers surging dramatically this year as investors bet that graphite’s use in so-called “green energy” applications could drive up demand.
Morgans analyst James Wilson told The Australian it was clear that sentiment towards the junior end of the resources sector was starting to improve.
While fresh equity funding may finally be starting to flow, Mr Wilson warned that it may come with a down side.
“There’s more risk money about, and that’s a good and bad thing,” he said. “It could be detrimental (to the junior sector) in that those companies who had been forced to think about consolidation, who were being squeezed out of existence and who probably never should have listed in the first place, are possibly hanging on just long enough to get capital to hang around for the next five years.”
The number of listed exploration companies trebled over the past decade to more than 900, and Mr Wilson said there was a need for that number to reduce in order to concentrate the quality of assets on offer to investors.
KPMG head of mining Carl Adams said it had been a tough few years for the sector, but improving prices for several commodities had offered encouragement for smaller miners and explorers.
“That end of the market has been a little bit of doom and gloom but there’s some shoots there. We’re seeing good movement in some prices, be it nickel, aluminium and copper and some other alternative ones as well, so sentiment is getting a bit better,” he said. “My view would be we’ve seen the worst of it.”