There’s a deluge of ASX mining announcements right now; here’s what to keep in mind
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The first half of 2018 saw plenty of activity from junior miners, but investors must be discerning if they want to find opportunities among the deluge of daily ASX announcements, says the head of resources researcher Austex Mining.
The number of ASX announcements from miners is up 50 per cent over the past 19 months, with “increased activity and increased demand for cash,” Austex’s Rob Murdoch said at last week’s Gold Coast Investment Showcase.
That’s against a backdrop of solid share price growth for both big producers and their junior counterparts — and there’s still room to move upwards, he said.
Since the start of 2016, the average share price increase from Rio Tinto (ASX:RIO), BHP Billiton (ASX:BHP) and South 32 (ASXS32) has been 100 per cent – and that’s still 15 per cent below where prices were in 2015, he said.
The average share price increase of 77 producer stocks on the ASX has been 84 per cent since the start of 2016, while the ASX300 mining and metals index is up 42 per cent compared with 12 months ago.
But simply launching a new project didn’t guarantee share price growth, as investors in some mining stocks have seen in recent weeks, Mr Murdoch said.
Here are three things mining investors should keep in mind in this news-heavy period:
Leading commodities change, so does the research
If investors are using individual commodities as a guide for share price growth, they should keep in mind that the top performers change frequently, Mr Murdoch said.
AusTex Mining tracks the average share price of junior miners based on the leading commodity they explore for or mine.
This past quarter, companies playing in the lithium and cobalt spaces have had a rough time despite plenty of activity in the space — while coal miners have had a strong few months.
Given the ever-changing space, Mr Murdoch said investors should think carefully about when to invest.
There have been strong share price returns over the past 12 months for miners in the transition between evaluating projects and emerging as producers, he said.
“Look to the project evaluations — including drilling results, then go talk to your advisers,” Mr Murdoch said.
Signs of a buying opportunity
Of the 19 producers that have listed on the ASX over the past 12 months, 15 have seen falling share prices, according to AusTech Mining data.
Meanwhile other junior producers have felt the effects of price dips in the past two weeks.
“People have been putting money in and it’s been going down,” Mr Murdoch said.
But Mr Murdoch believes this could be a buying opportunity — especially since miners with market caps of more than $100m are taking the lead of late with rising prices.
Projects and cash needs increasing
The average value of mining projects has increased 100 per cent among junior producer companies over the past three years, while the number of exploration projects has increased by 60 per cent over the past 19 months.
This means “increased activity and increased demand for cash” is continuing across the sector — but investors should take care to research each opportunity among the deluge of daily announcements.