Rush to raise cash as confidence bounces back despite global tensions

Confidence returned to financial markets this week even as central banks continued to tighten the interest rate screws, with nowhere more positive than Australia’s resources sector, which partied in a wet and windy Kalgoorlie.
4th August 2022
Tim Treadgold

It wasn’t just in WA’s unofficial mining capital that the good times rolled in the face of adversity caused by delayed flights for delegates and an overcrowded arts centre which hosts the Diggers & Dealers forum, there was a capital-raising rush underway on the stock market.

The timing of the two events, Australia’s biggest mining conference and a flood of fresh capital into the small end of mining, was not a coincidence with promoters taking advantage of an improved appetite for risk and a fresh set of June 30 accounts to take to the market.

At least 14 small mining companies took advantage of the local buoyant mood which defied concern in Europe about the ongoing war in Ukraine and the latest sabre-rattling by China over Taiwan.

Examples of companies dipping into the capital market while delegates were corralled in Kalgoorlie include:

  • Cobre raising $7 million to accelerate work on its promising copper discovery in Botswana. On the market, Cobre has risen by 14c (350%) over the past month to trade at 18c.
  • Vital Metals raising $45 million to complete a transition to rare earth exploration in Canada. On the market, Vital rose by 7% this week to 4.5c.
  • Arafura launching a $32 million equity raise to accelerate work on its Nolans rare earth project in the Northern Territory. On the market, Arafura was in a trading halt but has risen by 10% to 32c over the past month.
  • Medallion Metals raising $5.2 million to expand work on its Ravensthorpe gold project in WA. On the market, Medallion has slipped 0.3c lower over the past month to 19c, and
  • American West Metals raising $2.7 million for work on its U.S. copper and zinc projects. On the market, the stock is down 1.5c to 14c.

Other capital raisings were undertaken this week by Lindian Resources ($3 million), Castile Resources ($5.5 million), Thomson Resources ($2.2 million), Caravel Minerals ($3 million), Lanthanien Resources ($1.75 million), and Celsius Resources ($3.5 million).

Local appetite for the new share issues was enhanced by signs of continued strength in commodity markets, despite the Ukraine war and China’s latest threats in its stand-off with the U.S. over Taiwan.

During the week, prices for a number of commodities edged up with iron ore and gold leading the way. Iron ore added US$4 a tonne to trade at US$117/t, while gold rose by US$30 an ounce to US$1767/oz.

Prize at the Diggers & Dealers conference for the most optimistic forecast of the week went to Evolution Mining chief executive Jake Klein, who tipped a gold price in the range of US$2000-to-US$3000/oz over the next 12 months, a prediction which helped Evolution’s share price rise by 6c over the week to $2.67.

Other gold stocks followed, egged on by speculation of an outbreak of merger mania in the Leonora region of WA led by red-hot speculation of a deal between St Barbara and Genesis Minerals which helped Genesis add 11c to $1.47 and St Barbara rise by 16c to $1.21. Red5, which could also be in the merger mix, crept up by 0.5c to 28c,

De Grey Mining, which could become a player in a similar bout of deal-making in its Pilbara backyard, rose by 6c to 95c, aided by fresh drilling news that included a thick intersection (359.4 metres) at 1.2 grams tonne below its Diucon discovery.

Gold news and moves during the week also included:

  • Musgrave Minerals adding 2.7c to 28c after reporting high grade drill hits at its Cue project in WA including 7m at 149.77g/t from a depth of 143m. Canaccord Genuity reckons Musgrave is heading for 55c.
  • Ausgold reporting a maiden 1.28-million-ounce gold reserve at its Katanning gold project in WA. The stock crept up by 0.1c to 2.8c.
  • Calidus adding 5c to 74c after reporting encouraging soil survey anomalies at its Blue Spec project in WA’s Pilbara region, and
  • West African delivery a 4.5-million-ounce gold resource and forecast 18.5-year mine life at its Kiaka project in Burkina Faso, news which lifted the stock by 9c to $1.41.

Copper, the metal which best reflects underlying economic conditions, reversed recent gains to slip US10c lower to US$3.46 a pound taking with it the share prices of local copper leaders including OZ Minerals which lost 21c to $18.45 and Sandfire which was down 5c to $4.41.

The weaker copper market, and similar weakness in the oil price, reflected concern in the health of the global economy, especially Europe which is struggling with high energy prices, and China, which is persisting with a self-destructive (and doomed to fail) zero-Covid policy and associated whole-of-city lockdowns.

There is also, ticking away in the background, the uncertainty of how long financial markets can resist the gravitational pull of rising official interest rates which will eventually trigger a flight of capital out of high-risk markets into safe havens, such as gold and the U.S. dollar.

During the week the president of the San Francisco Federal Reserve, Mary Daly, warned that the U.S. central bank was “nowhere near done” with its interest rate increases as it tries to cool 40-year high inflation.

After gold, always a Kalgoorlie favourite, the two hottest commodities were lithium and rare earths, key players in the fast-growing technology metals sector.

Pilbara Minerals was the lithium star with another bonanza online auction result for 5000 tonnes of 5.5% lithium concentrate which sold for a price equivalent US$7012 a tonne for 6% concentrate, helping the stock add 3.5c over the week to close at $2.81. Macquarie Bank has a $4 target for Pilbara.

Other lithium news and moves included:

  • Kairos reporting high-grade assays of up to 1.91% lithium oxide from samples at its Mt York gold project which lies adjacent to Pilbara’s Pilgangoora project. Kairos added 0.2c to 2.9c.
  • Critical Resources also rose by 0.2c to 4.6c after reporting a 40.9m intersection of lithium-bearing pegmatite on its Mavis Lake project in Canada, and
  • Cygnus Gold rose by 2.5c to 23c after announcing a switch from gold to lithium through a deal to earn a 70% stake in the Pontax project in Canada.

Rare earth news was dominated at the Diggers & Dealers conference by an announcement from Lynas Rare Earths that it would invest $500 million expanding production at its Mt Weld mine in WA, news which helped Lynas rise by 27c to $9.16.

Other rare earth news and moves included:

  • Indiana Resources, up 0.8c to 6.9c after reporting high grade ionic clay assays from its Central Gawler project in South Australia
  • American Rare Earths adding 2c to 27c after reporting consistent rare earth mineralisation at its Halleck Creek project in the U.S., and
  • Narryer Metals rising by 2c to 12c after reporting the start of low-cost exploration of old drill samples in the South Australian core library which might help pinpoint exploration targets at the company’s Ceduna project.

Overall, the Australian stock market had a cautious week with optimism in resources and the country’s booming trade surplus weighted down by global uncertainties.

The all-ordinaries index was effectively flat at 7210 points while the gold index added 4% and the broader metals a mining index was up 2.6%.

Other news and moves of interest included:

  • Lunnon Metals adding 2.5c to 95c after reporting more high-grade intersections at its Baker project near Kambalda with a best hit of 19m at 6.01% nickel.
  • Galileo Mining moving up by a modest 0.5c to $1.10 after first reporting additional positive assays from drilling at its Callisto palladium project in WA, followed by a supplementary report which noted the high grades of high-value rhodium in the latest core.
  • DevEx added 8.5c to 36c thanks to growing interest in its Nabarlek uranium project in the Northern Territory, and
  • Develop Global rose by 18c to $2.42 after releasing a report which confirmed the potential of the recently acquired Woodlawn zinc project in NSW.

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