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Reversing the trend

WA small stock mining service companies have been left searching for a way to reverse a trend by fund managers and institutions to flee the sector.

Exploration and drilling companies Ausdrill and Brandrill have watched as ING, Portfolio Partners Ltd, Permanent Trustee Company Ltd have left the industry.

Mathew Whyte, company secretary for Brandrill, which lost ING’s 7 per cent shareholding in late August, believes the moves were pre-emptive of the company’s withdrawal from the S&P ASX 200 Index.

“It’s known months in advance what is going to be happening with the ratings,” Mr Whyte said. “A lot of fund managers can only invest in companies when they are on the index. Once you come out of that rating that institutional investment basically falls away.”

In the past year Brandrill has watched its share price soar above $2 on speculation that its blasting PCF technology would revolutionise blasting methods, and challenge Orica’s dominant market position. Today the share price is closer to 60 cents.

Earlier this week Brandrill announced the PCF technology was going to be used at Normandy’s Mt McClure gold mine, while an extended five-year mining service contract for Normandy’s Bronzewing gold operation also was reached.

While Brandrill blames its drop in market capitalisation, resulting in the fall from the index, as the major factor behind the loss of institutional investment in the sector, it is not the only reason, as Ausdrill managing director Ron Sayers points out.

“The Native Title issue hasn’t helped and the number of junior explorers with finance is all down,” Mr Sayers said.

“As a result, institutional investors are leaving in droves. All the institutional investors have fled the register.”

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