What happened to the top ASX resources stocks of 2017?
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In mining and exploration, six years is enough time to sort the pretenders from the contenders.
Trends will come, go, and sometimes come back again. Often what is left are the explorers and project development companies with a real chance of success.
In 2017, the embryonic battery metals boom had everyone excited.
About 50% of the top 40 small caps had exposure to battery metals such as cobalt, lithium and high purity alumina.
In hindsight it was too early — hundreds of hopefuls would bail to more palatable metals when sentiment dived a few years later – but those with good projects stuck to their guns, and in 2023, are reaping the rewards.
Gold explorers were the next best performing theme; of these, some of the biggest movers were Pilbara conglomerate gold nugget explorers.
An Australian gold rush kicked off July that year when Artemis Resources (ASX:ARV) and Canadian partner Novo Resources made a gold nugget find at their Purdy’s Reward site in the Pilbara region of WA.
The mention of “Witwatersrand-style” and “conglomerate-hosted” gold had investors salivating. (Witwatersrand refers to the Witwatersrand Basin in South Africa — a geological formation that houses the world’s biggest known gold reserves).
Unlike battery metals, the conglomerate gold story didn’t have legs.
One stat shows how difficult it is for investors who fall in love with hype stocks to succeed — of 2017’s top 40 small caps, 15 have suffered losses of 70% or more.
Eight of those have lost over 90% of their value since peaking in 2017. Take conglomerate gold darling ARV for example — down 94% from 29c in late 2017 to 1.6c per share currently.
This exercise is also an interesting glimpse into how years of cap raisings and placements can dilute your holdings. A ballooning number of shares on issue may push up the market cap, but the value of your shares plummet.
Just look at Meteoric Resources (ASX:MEI). The up-and-coming cobalt/gold/rare earths explorer has increased its market cap from $18m to $191m since the end of 2017, a 960% gain.
And yet the share price is only 56% bigger, thanks to the number of shares on issue swelling from 460m to 1.5 billion over the same period.
Now for the good news. Of the 15 stocks that continued to succeed, a handful have succeeded big.
Punters who bought and held onto a couple of these winners in 2017, even after they had made their initial gains, would be laughing all the way to the bank in 2023.
Scroll or swipe to reveal table. Click headings to sort. Best viewed on a laptop
DE GREY MINING (ASX:DEG) +664% (post 2017)
In 2017, DEG was plugging away at its Pilbara gold project where it had amassed 1.2Moz across several targets.
However, it was the company’s involvement in the short-lived conglomerate gold craze which ensured its inclusion in top resources stocks of 2017.
Once that frenzy died down so did the DEG share price – to a low of 5c per share —until it made one of the biggest gold discoveries in recent memory, early 2020.
The rest is history. Hemi is now one of the best Australian gold finds of the 21st century and the third globally significant deposit to be discovered since 2000 after AngloGold and IGO’s Tropicana find (2005) and Gold Road’s Gruyere discovery (2013).
A November 2017 drill hole represents the rebirth of Bellevue Gold (ASX:BGL), now one of Australia’s most beloved gold project developers.
The now-3.1Moz and growing mine is in development, with 200,000ozpa expected in the first five years of production at all-in sustaining cost (AISC) of A$1,000-$1,100/oz – in the lowest quartile of Australian gold producers.
Maiden production is expected in Q3 this year.
THE LITHIUM STOCKS
Unlike many of their peers, these companies continued working on their projects during the dark days of 2019-2020 and are now preparing to reap the rewards over the next few years.
Except for AVZ, maybe. Let’s wait and see.
…AND THE TAKEOVER TARGETS
In 2017 lethargic rare earths stock Spectrum (ASX:SPX) jumped on the Pilbara conglomerate train for some short term success. It then died in the arse until early 2019, when it bought an old WA gold mine called Penny West for $1m.
The $5.3m capped minnow immediately hit bonanza grade gold.
The gold kept coming. In February 2020, gold miner Ramelius (ASX:RMS) launched a successful off-market takeover bid for the company worth one Ramelius share for every 10 Spectrum shares, plus 1.7c cash per Spectrum share held, valuing it at a cool $270m.
Ed Eshuys’ gold exploration and investment vehicle DGO Gold (ASX:DGO) was also hunting Pilbara gold in 2017.
In May 2018 it began investing in De Grey, and saw its share price explode in tandem with the big mine finder early 2020. It was that 14.4% stake which prompted Gold Road Resources (ASX:GOR) to table a $308m takeover offer last year, which was quickly accepted.