Why London is no longer calling on Aussie explorers
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Tim Treadgold reports from London
London money has been a feature of every Australian mining boom since Claude de Bernales famously rode into WA’s gold capital of Kalgoorlie in 1897 on a penny-farthing bicycle, top hat and monocle in place, to convince prospectors to sell him their gold claims.
But this time around London is missing in action.
What that might mean to the longevity of the current near-boom conditions in the Australian mining market is uncertain. But less money flowing into grass roots exploration and company development generally means shortened activity on the stock exchange.
Brexit, the painfully complex process of extricating Britain from the European Union, is killing the appetite of London investors for high-risk opportunities — which is what most exploration projects are.
Just how dulled-down London has become in the mining market that it traditionally dominates could be tested over the past week at three mining conferences where the mood was sombre, verging on gloomy.
A simple test which I applied was to notionally compare the London events (Mines & Money, 1-2-1, and Mining Capital) with Kalgoorlie’s Diggers & Dealers forum in August.
In a nutshell: chalk and cheese.
A flat mood in London
Where Diggers & Dealers was bubbling with optimism courtesy of relatively strong metal prices and two new get-rich-quick theories (Pilbara nuggets and battery metals) the trio of London events was flat, reflecting the mood of the City which is suffering a from shell-shock induced by Brexit and an impossibly convoluted euro-exit process which no-one understands and which might not even be possible.
Highlights, and there were a few, included a well-received presentation from Matt Gill, chief executive of White Rock Minerals, a company which has received several earlier mentions in Stockhead, including a detail report by Barry Fitzgerald on September 14.
A small company with big plans, and a very impressive board of directors, White Rock (ASX:WRM) looks like a company destined to succeed as a zinc producer at its promising Red Mountain project in Alaska, and perhaps at its Carrington gold and silver project in northern NSW.
But, even after receiving a positive reception from the audience at the Mines & Money conference White Rock’s share price remained stuck at 1.3c (where it was in September), and then slipped a little lower to 1.2c by the close of trading last week.
All small companies can struggle to convince investors that they’re worth buying, but in the case of White Rock in London there was obviously no-one in the audience prepared to shake the months out of his wallet.
It was a similar story at 1-2-1, a conference which sits individual investors in front of senior company managers (hence the name, one-to-one). But most of the 23 Australian explorers and small producers failed to register much in the way of share price moves during or after their sessions.
Lessons from London
There are two lessons from what happened in London this week.
Firstly, that Australian mining companies are keen to get back into the London market, perhaps because they remember that 10 years ago the Alternative Investment Market (AIM) of the London Stock Exchange was a wonderful place to drive share prices higher.
The second lesson was that even an Australian invasion of the conferences (23 Australian companies at 1-2-1, represented 31 per cent of the 74 companies at the event) failed to trigger a buyer response from London investors who have locked their money away until Brexit is achieved, with the added concern that it looks increasingly likely that there will be a change of government next year with a big swing to the anti-business Labor Party.
For Australian resource stocks the message is quite clear; you’re on your own, there’s not going to be another Claude de Bernales riding into town with an offer to take your projects to London for marketing to an audience keen to buy a slice of the colonies.
Companies with London in their sights will need to have something other than a slice of Australia as a marketing tool, such as a substantial presence in African gold, which is what might help Resolute Mining (ASX:RSG) succeed with its plans for a London listing.
Resolute’s best assets are in the African countries of Mali, where it operates the high-class Syama gold mine, and Ghana, where it is bringing the Bibiani gold mine back into production.
London investors are traditionally comfortable with African assets and might welcome an ability to trade more easily in Resolute’s shares.
Another Australian company with a non-Australian resource project moving towards development and with a London listing in mind is the potash stock, Danakali, which owns the Colluli project in the north-African country of Eritrea, a part of the world which might be more comfortable for London investors than those in Australia.
But, for the bulk of Australian miners last week’s conferences left a clear impression that it might be best to focus on marketing to a local audience, or those in Asian countries such as China, where interest in Australian resources remains strong.
Tim Treadgold’s The Explorer column appears weekly in Stockhead.
Tim is a Perth-based finance journalist who has been covering the resources sector for more than 40 years for national and international publications, long enough to know what’s gold and what’s fool’s gold — of which there’s quite a bit in the mining world.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.