Juniors stuff their pockets in a sign that risk appetite is returning

5th April 2019
Tim Treadgold

A capital-raising rush over the past week by small mining companies is a clear signal that the downturn of the past few years is coming to an end.

While not widely recognised by market commentators, there have been more than a dozen successful share issues of different sizes, which is good news for the companies getting the cash -- but better news for the wider market because it means a risk appetite is returning.

Millennium Minerals, VRX Silica, Navarre Minerals, Marindi Metals, Matador Mining, Kalium Lakes, Cassini Resources, Hastings Technology Metals, Orinoco Gold, Geopacific Resource, DGO Gold and Gascoyne Resources are among the miners topping up their bank accounts.

In some cases, the capital raisings will do little more than keep the lights on. But a more positive way of seeing the success in attracting funds is that a fundamental shift in confidence appears to be underway.

Better-than-expected news from commodity markets as China and the US move closer to ending their trade war, lifting demand for most metals, is one important factor at work – even if it meant gold was left behind in the shift back to industrial metals.

Outages and shortages are other factors driving the market because after seven years of minimal investment in exploration and mine development, there are hints of a severe supply shortfall – just as demand picks up.

Iron ore is the most obvious example of what’s happening, with lost output from Brazil triggering a significant price response among Australian miners of the mineral – which became supercharged this week as cyclone damage restricted exports from WA.

The iron ore price rose to once again be within sight of $US100 a tonne, driving every company exposed to the material to fresh share-price highs, led by Rio Tinto which scored its own century when its share eased past $100, a level not seen for 11 years.

BHP, Fortescue, Mt Gibson and Champion Iron also all hit 12-month price highs and Fortescue used the recovery to announce a $US2.6 billion investment in a magnetite processing project aimed at boosting its overall iron ore grade.

Significantly, iron ore was not alone in benefiting from outage and shortage events. Zinc and copper are also moving up thanks to a combination of problems at mines and processing plants just as Chinese demand picks up.

Gold, which has been the star of the Australian mining industry over the past few years, has lost ground, but not much. The international price remained at around $US1292 an ounce while the Australian price dipped to $A1817/oz.

Some of the more interesting situations among the companies which have attracted fresh capital include:

  • Cassini, which issued 70 million new shares at 10c each to a Chinese investor, Tinci (HK) Ltd. The funds will ensure that Cassini is fully-funded through the feasibility of its West Musgraves nickel sulphate project.
  • Kalium Lakes, which raised $20.8 million through a placement with a private equity fund, Greenstone Resources. The funds will help pay for early work on the company’s Beyondie potash project, with Greenstone emerging with a 19.99% stake in Kalium.
  • Matador Mining raised $5 million for work on the Cape Ray gold project in Canada with an added boost being the backing of two seasoned Australian gold industry executives, Mark Clark and Nick Georgetta.
  • Marindi Metals raised $403,000 to push ahead with a gold exploration program at Forrestania in WA.
  • Navarre raised $6 million to further develop its Victorian gold interests with cornerstone investors, Kirkland Lake and the Victor Smorgon group, supporting the placement of 80 million shares at 7.5c each.
  • Millennium raised $15 million in an oversubscribed rights issue priced at 16.5c for continuing work at its Nullagine gold project in WA, and
  • Gascoyne said it had received firm commitments for $3.8 million as a first stage in a capital raising designed to pull in $24.5 million for plant improvements at its Dalgaranga gold project.

The latest capital raisings follow a trend started last month when Galena Mining attracted $10 million in fresh capital from Multiplex Construction heir Tim Roberts for work on its Abra lead project and Battery Minerals raised $5 million for its graphite projects in Mozambique.

Rare earths stocks, which received a boost in March from the proposed takeover by Wesfarmers of Lynas Corporation, had a quieter week as the competing parties moved into back-door mode to try to resolve a processing-waste issue with the Malaysia Government.

Other market moving and newsworthy events of the past few days include:

  • Adriatic Metals adding 12c to reach a 12-month high of 96c after announcing a milestone moment in development approval for its Rupice base metals project in Serbia. The stock has doubled in six months.
  • Galan Lithium announced the discovery of thick and rich lithium brines during drilling at its Candelas project in Argentina. On the market, the stock rose by 6c to 30c.
  • Strandline Resources said it had made major improvements in the recovery of titanium minerals at its Coburn project in WA, news which lifted the stock by 1.2c to 10c.
  • Lefroy Exploration said it had started drilling at its highly-regarded Lucky Strike gold exploration program on Lake Lefroy south of Kalgoorlie in WA, adding 2c to 20c.
  • Atrum Coal announced a maiden resource of 174 million tonnes of anthracite (high quality) coal at its Panorama North project in Canada. The stock added 5c to 29c.
  • Cardinal Resources said it had boosted the reserve component of its Namdini gold project in Ghana to 5.1 million ounces. On the market, the stock added 3c to 36c, and
  • Independence Group got a modest investor response to a report that it had made good progress with plans to make nickel sulphate for the battery industry from the metal it produces at the Nova mine. The stock added 5c to $4.91, but analysts at Credit Suisse said more work was required, maintaining a neutral rating of the stock and a price target of just $4.10.

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