Investor love returns to resources amid a surge in floats and capital raisings
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Five junior explorers have so far debuted on the ASX this year and another nine initial public offerings, re-listings or backdoor listings are set to take place before May.
That places the small cap resources sector firmly on track to beat the 15 floats it did in the first six months of 2017.
“I’d have to say that 2018 looks like it will be a bigger year at least for the delivery of IPOs than 2017, and quite probably larger amounts of money raised as well,” Hedley Widdup, a fund manager for investment firm Lion Selection Group, told Stockhead.
Tao Commodities, Accelerate Resources, Podium Minerals, Mako Gold, AustSino Resources, Saturn Metals, Eagle Mountain Mining, Mintails and Ausroc Metals are all set to float in coming months.
Gold explorer Black Cat Syndicate (ASX:BC8) today became the fifth junior this month to light up the boards of the Australian bourse, following BlackEarth Minerals (ASX:BEM), Frontier Diamonds (ASX:FDX), Cygnus Gold (ASX:CY5) and Tietto Minerals (ASX:TIE).
Black Cat closed its first day at 30c — a 50 per cent premium to its initial public offer (IPO) price, equating to a post-listing market cap of around $22.4 million.
The listing follows the completion of an oversubscribed $6 million IPO.
“There was a lot of interest when we went to market,” managing director Gareth Solly told Stockhead. “It was very much over-subscribed.”
Black Cat is exploring for high-grade gold just 25km east of Kalgoorlie at its Bulong project. The company’s plan is to start drilling as quickly as possible to validate the open pit potential of its Queen Margaret prospect as well as test depth extensions.
“I think at the moment the gold price is in a good spot so there’s definitely a market for new players,” Mr Solly said.
An abundance of cash
Investor appetite for small cap exploration and mining stocks is definitely picking up, with the market appearing a lot more open for raising cash.
Mr Widdup said the market had “definitely regained its risk appetite and it’s definitely regained its appetite for mining”.
Emerging heavy rare earths producer Northern Minerals (ASX:NTU) is doubling its recent share purchase plan to $10 million and extending the closing date after receiving applications exceeding the original $5 million target.
Northern Minerals expects to start shipping dysprosium from its Browns Range project in Western Australia in the September quarter.
Dysprosium is an additive used in the permanent magnets required for the motors in electric vehicles and wind turbines. The heavy rare earth allows the magnet to retain its charge at a higher temperature.
While most investors have been closely watching “battery metals” such as lithium, cobalt and graphite used in electric car batteries, attention is turning to rare earth “magnet metals” such as dysprosium, neodymium and praseodymium used in electric car motors.
“With the electric vehicle evolution upon us there’s just simply a need for more rare earths in the electric vehicle application,” Northern Minerals managing director George Bauk told Stockhead earlier this week.
Mr Widdup said there also aren’t a lot of players in the rare earths space.
“There’s like three or four companies which are anything other than sort of just a conceptual play,” he said. “So Northern Minerals will benefit from that. If you extended their chart back a few years, it’s been a pretty rough ride for most of the investors in all of those rare earth stories as well. So they’re definitely benefiting at the moment and it’s hopefully a bit of a revival for them.”
The Pilbara-focused conglomerate gold players, meanwhile, are seeing fresh cash injections from their institutional backers.
Artemis Resources (ASX:ARV) has received firm bought deal commitments from London’s Global Investment Strategy UK to raise $4.5 million.
Artemis’ partner Novo Resources is the leader of the hunt to unravel the secrets of gold nuggets found in a previously overlooked layer of rock classed as a conglomerate in the Pilbara region of WA.
“This overseas institutional financing further increases our cash reserves as we head in to a very busy six months period of re-commissioning and upgrades at our Radio Hill treatment plant,” executive chairman David Lenigas told investors on Tuesday.
The refurbishment of the 425,000-tonne-per-annum plant is expected to cost $5.25 million.
Artemis is recommissioning the Radio Hill plant to process the conglomerate gold or a paleoplacer resource from the Purdy’s Reward joint venture or Novo’s own tenements, such as Comet Well.