Jostling among majors set to energise junior miners

7th June 2019
Resources Rising Stars

Sentiment in the junior mining space has reached “peak despondency” and could be ripe for a turning point, according to a respected fund manager (reports The West Australian).

Delivering the keynote address at the Resources Rising Stars conference on the Gold Coast, Lion Selection Group investment manager Hedley Widdup says a resurgence in M&A activity at the major end of the resources sector could usher in growing interest in the junior end of the market as the big players go looking for growth.

He noted the recent merger between Newmont and Goldcorp and Barrick Gold’s acquisition of Randgold.

“Growth-oriented M&A has re-emerged, starting to move the sector on,” he said.

A former geologist with WMC, Mr Widdup also noted that the Canadian market, a bellwether for global mining sentiment, had become besotted with cannabis.

“Cannabis stocks comprised 22 per cent of fresh equity raised on the TSX in Canada last year despite representing just 2 per cent of the market,” he said.

“This has coincided with a new low for mining capital raisings in Canada.”

But Mr Widdup said as capital flow for cannabis and tech subsided, it could signal a resurgence in the junior end of the resources market.

He said the mining sector had split into a two-speed market recently, defined by companies that were funded and those that were not.

Mr Widdup noted that the major miners had become cheap between 2011-2015 before moving back up.

“In 2015, BHP’s balance sheet was ‘broken’. It’s almost trebled in price since its balance sheet was busted and they didn’t do too much different other than pay less dividends,” he said.

“Despondency and capitulation come before a turning point.”

Lion Selection Group is an ASX-listed specialist mining investment group based in Melbourne.


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