NO-ONE has written much about stock market boom psychology except that it is a time when greed replaces fear.
What also seems to occur is that all booms follow a similar pattern, an initial sharp upward surge when the earlybirds get the best feed as everything, good and bad, rises. Then comes a consolidation phase, replaced by more selective share price movement as quality becomes a factor – a stage Briefcase thinks will arrive in the new year.
Right now, with prices for most speculative mineral explorers generally falling, the market is taking a breather, which is a good time to fossick around looking for the stocks that have the quality to survive phase two and, heaven forbid, actually go on to mine something, make a profit and pay a dividend. A detailed look at the current crop of market favourites is not that inspiring, though a few hidden gems can be identified.
Reliance Mining is one example of an emerging nickel stock that has done well without management spruiking. Jackson Gold is an interesting grass roots gold explorer. Western Areas is over-spruiked but may be on to something big and View Resources has a corporate structure for interesting deals and a mine to generate a small amount of fast cash.
Before looking at any of the stocks that Briefcase thinks have credibility for stage two of the boom please note well, these are not share tips.
Buy them at your peril and blame yourself if they crash because investing is only a game played by consenting adults and Briefcase, in keeping with those fine rules of journalism, takes no responsibility for readers being greedy.
Reliance, which has risen from 30 cents to 70 cents since mid-July has its foot on some of WMC’s old Kambalda nickel acreage. In fact, it may be the best available because it includes the Beta Hunt mine, which has plenty of residual ore ready to mine, and has a number of very interesting exploration targets.
The company is cashed up, is busy refurbishing the mine, which has 20,800 tonnes of nickel in the ground, and should start production early in 2004.
Reliance is also starting to take a look at the East Alpha target which appears to be an extension of the rich Lunnon Shoot which was a prolific source of nickel for WMC over many years.
Jackson, which is up from 15 cents in June to around 27 cents today, has little to offer other than what looks to be a very interesting gold discovery called Wallbrook just to the north of Kalgoorlie. It is early days but some of the drilling intersections are seriously interesting including one of 120 metres at 1.27 grams a tonne, which is low-grade but of exceptional thickness.
View, which has risen from 3 cents in mid-July to 8 cents today is another of the stocks with an old WMC nickel mine under its belt and a seriously interesting management structure.
Western Areas, which has rocketed from 19 cents to $2.20 and all the way back to $1.08 thanks to day traders may actually have a serious discovery at Flying Fox despite admitting that the project’s geology is more complex than first thought.
Rather than get too excited about the four stocks mentioned it is worth using them as a guide to the next phase of what looks to be a sustainable recovery in the exploration sector and to do your own homework into which companies have the integrity to survive.
ON the question of integrity it is interesting to note that the Canadians have been first to move on the question of naughtiness among the junior miners in the current boom.
The British Columbia Securities Commission is arranging a series of workshops to explain new disclosure rules to company promoters returning to the game after a 10-year hibernation.
In keeping with the low-key way in which Canadians approach most issues a spokesman for the BCSC told the Globe and Mail newspapers last week that the workshops were intended to help corporate players understand the new rules that govern mineral exploration reports.
The problem that triggered the education campaign is the release of old reports that pre-date the dreadful Bre-X scandal of the mid 1990s and which have not been brought up to date.
For readers not around at the time, Bre-X was a massive fraud involving an alleged Indonesian gold discovery by a Canadian company.
In fact, the numbers were doctored, a geologist involved fell out of a helicopter when the scandal broke, and billions of dollars were flushed around the S-bend.
It would be encouraging to think that corporate regulators in places such as WA were also looking at some of the reports surfacing about old gold and nickel prospects because the rules here have also changed.
The problem, however, is that corporate regulation has gone national and very few (if any) company watchers here have a clue about reading mining company reports.
GRIPE time. Is it the imagination of Briefcase, or is it true, that annual meetings have become the most dreadfully boring affairs thanks, in part, to new corporate regulations designed to protect and inform shareholders.
Formality has replaced any intimacy between management and share-holders and lobby groups such as the Australian Shareholders Association, have taken it on themselves to run the meetings on behalf of a handful of aggrieved investors who do not like the chairman or one of the directors.
Given that most complaints seem to come from people owning a handful of shares perhaps they might care to do the right thing and sell their shares, and annoy someone else. As someone wise once said, capitalism ’aint democratic.
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