For the first time in two years, Kerry Stevenson has had to turn people away from seminars she runs on investing in Australia’s small-cap mining companies.
The seminars have quickly swelled to capacity numbers, underscoring, Stevenson says, renewed hunger for Australian penny mining stocks after a long hiatus.
“People are finally saying to me they are ready to get their toes wet again in this end of the market,” she said.
The end of Australia’s decade-long mining boom turned dozens of exploration companies and small miners into “penny dreadfuls” – all but ignored by institutional lenders and private equity finaciers.
Funding remains a key concern for most of the sector, with a survey by Ernst & Young-indicating little has changed in the past 12 months for many juniors and explorers, which remain “cash-starved and focused on survival.”
Still, says Morgans Stockbroking analyst James Wilson, “green shoots are appearing across the sector.”
The S&P/ASX 300 Metals & Mining Index sits near a 6-month high, having jumped 11 percent in the past seven weeks, although it is still more than 40 percent below its peak in mid-2008.
Investors are starting to fund some miners, but are being more selective and are wary of commodities that show little promise.
Pilbara Minerals, which is looking in Australia for electronics component tantalum and capitalised at just A$10.6 million ($9.8 million), raised more than A$3.5 million in recent weeks.
“That’s more than we could have raised in the last three years,” said Chief Executive Neil Biddle.
Macphersons Resources Ltd, which is exploring for silver and zinc in Australia, this week raised A$8 million via a placement.
“The thinking is the market has turned the corner for the right projects with a future,”Macpherson’s managing director, Morrie Goodz said.
Companies exploring for graphite – used to improve the effficiency of electric cars – have posted hefty share price gains, jumping more than 200 percent on average over the past year, according to Pattersons Securities.
A flurry of takeovers and asset acquisitions also suggests valuations sit at a cyclical low, and at some stage equity market sentiment will catch up, says Morgan’s Wilson.
One of the biggest deals in the sector, a friendly $570 million offer by Canada’sB2Gold for Papillon Resources , valued the Australian gold explorer at A$1.72 a share – more than twice its price at the start of the year.
Miners will get a chance to gauge interest in the sector next week at the annual Diggers and Dealers Mining forum in the outback mining town of Kalgoorlie.
Nearly 50 companies prospecting and mining for everything from gold in Senegal to graphite in Mozambique to iron ore in Australia are due to attend, in line with recent years, say organisers.
“We consider this to be a reasonable result given the explorers have no money,” said John Langford, a forum director.
Commodity markets are also entering the second half on a positive note, with long-suffering metals like nickel, zinc and aluminium showing strong price gains.
But, cautions Australia & New Zealand Bank, any recovery is likely to be far more gradual than in the past, tempered by lower liquidity and a stronger U.S. dollar.
($1 = 1.0774 Australian Dollars) (Editing by Richard Pullin)