News - Prospector's Diary

Battery and technology metals led the way up in another short trading week which saw the Australian stock market bump against an all-time high while a number of potentially interesting discoveries and curious value gaps emerged.

Star of the show was Petratherm, a stock which once made headlines as a geothermal (hot water) energy explorer, but stormed back on Wednesday with a high-grade rare earth discovery which lifted the company’s share price up by 12c (225%) to 17c, before easing to 15c for a 10c gain over three days.

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The global commodity rush slowed this week as markets prepared for the trading break over Easter but two factors, war and inflation, continued to rattle investor confidence as well as sparking a shift back to the ultimate safe haven, gold.

ANZ Bank expects gold to remain in favour as other currencies are debased by the highest rates of inflation since the 1980s, tipping on Tuesday that a rise by gold to above $US1960 an ounce “would be a bullish signal”. That hurdle was cleared a few hours after ANZ published its comments with the gold price moving up to $US1967/oz, a rise of $US30/oz in three days.

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Government money without strings attached always sounds too good to be true but it could be the next Australian mining company share price driver, just as the big picture of the global economy darkens.

Iluka Resources, a titanium minerals and zircon producer, led the way this week to the government cash trough, securing a $1.27 billion loan from the Australian Government for its earth refinery in WA. Other government funding deals are expected to flow over the next few weeks, according to Iluka’s chief executive, Tom O’Leary, as pressure grows in the western world to counter China’s control of critical minerals and the Ukraine war threatens trade flows.

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Priced to perfection or poised for a correction? That’s the question which investors should be considering as a mini-boom in commodities powers on against a background of international storm clouds.

A mid-week warning from the Bank of America (BofA) that the U.S. stock market has wandered into a bear trap ruffled a few feathers but not enough to deter optimists who saw signs of an easing in the Ukraine war as reason to keep on buying. It was a similar story in Australia where the all-ordinaries index rose by an agreeable 1.7% over the week, taking the gain for the past month to an impressive 7%. The metal and mining index did even better, up 4.8% this week and 10% for the month.

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Discovery and development news, which has been largely drowned out by the Ukraine war, made a welcome return this week on multiple fronts with a pair of oil and gas strikes joined by positive moves in gold, iron ore and titanium minerals.

Small oil and gas explorers led the way with Carnarvon Energy up 4c to 36c over the week, taking its increase over the past month to 14c (63%), followed by Buru Energy, up 6c (31%) this week to 25c. Oil, up $US17 a barrel to $US120/bbl was a factor in both stocks rising, but the more important elements were Carnarvon’s 30% stake in what looks to be a significant oil discovery off the north-west coast of WA, and Buru hitting what could be a company-changing onshore WA gas discovery.

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“Blink and you’ll miss it” is an old quip about fast moving events which has rarely been more true than today with war, inflation, and commodity market turmoil joined this week by the first step up in U.S. interest rates just as Russia stumbled towards a sovereign debt default.

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The great nickel squeeze, which is said to have cost a Chinese billionaire $US5 billion, was a lot more than a flawed punt. It was a perfect example of the theme which has returned to dominate financial and commodity markets, energy.

Until extraordinary events occurred this week on the London Metal Exchange, some investors, and governments, believed the age of oil, coal and gas was being replaced by an era of renewable power and electric vehicles, a metal-heavy shift with its demand for CLANCs (copper, lithium, aluminium, nickel, and cobalt). Energy transition will still happen but it has been delayed, perhaps for decades, by a brutal wake-up call in Ukraine where Russia is trying to subjugate a neighbour and blackmail the world with its vast reserves of oil, gas and coal.

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Thermal coal trading at an all-time high of US$435 a tonne tells you everything about the commodity boom unleashed by Russia’s war with Ukraine, and the Chinese Government’s very commercial response summed up as: “buy everything and don’t worry about the price”. BHP shares up 11.5% over just five trading days to $50, a rise which boosted the stock-market value of the world’s biggest mining company by $25 billion, tells you everything you need to know about the effect of the Ukraine commodity boom on resource stocks.

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