Australian Mining Investments slumps on copper revisionadmin
Upstart explorer Australian Mining Investments Ltd. more than halved its resource estimate for a copper discovery in Queensland state on Monday, slicing 50 percent off the value of its shares.
The company, which this week changes its name to CuDeco Ltd., had seen its stock rocket to a high of A$10, from 29 cents, in less than two months after an earlier report dangled the prospect of a giant copper find in front of eager investors.
Surging metals prices, driven by strong demand from the rapid industrialising economies of China and India, have ignited investor interest in small mining companies whenever there is hope of a significant discovery.
But on Monday, the company said only 25 million tonnes of a previously reported 59 million tonnes could be classified as an inferred resource, with the remainder classed only as a speculative target, based on information extrapolated beyond a test drilling area.
“This was really not an acceptable extrapolation, to put it modestly,” F.W. Holst & Co. resources analyst Rob Craigie said. “They made a release claiming an inferred resource that was not backed up by drilling information.”
The stock resumed trade at A$4.05, fell to a low of A$2.55 and closed down 50 percent at A$3.56, wiping out about A$186 million (US$140 million) of its value.
It had been on a trading halt since closing at A$7.11 on July 5, after its soaring run raised alarm bells with market regulators.
The country’s corporate watchdog, the Australian Securities & Investments Commission, last week said it was monitoring disclosure and trading in Australian Mining Investments, stopping a shareholder vote on the issuance of executive options.
“I can confirm that our inquiries are continuing,” an ASIC spokeswoman said on Monday.
Enthusiasm for the discovery was fuelled by its location in an historically rich copper mining region and speculation that neighbouring mining heavyweight Xstrata could make a takeover bid.
Swiss-based Xstrata is Australia’s largest copper producer and works the Ernest Henry mine 40 kilometres (29 miles) away from the Rocklands deposit.
Fat Prophets senior resources analyst Gavin Wendt said speculative buyers had taken quick profits after piling into Australian Mining Investments, but the company now had to provide more certainty about the discovery for longer-term investors.
“From now on it is not going to be easy for the company. There have been a lot of claims made and a lot of people have bought into the stock, so they are going to have to perform, and of course they are going to be very closely watched as well,” he said.
The company said its initial inferred resource estimate was based on drill-testing over a length of 500 metres and to a depth of 200 metres.
It said it had further extrapolated to a depth of 375 metres and a length of 950 metres in classifying the resource, based on a range of assumptions.
“Notwithstanding the above, your company concedes that a portion of the zone incorporating the reported inferred resource could be classified as a target,” it said.
It said it had separated the classification in part to satisfy the Australian Stock Exchange’s demand for more detailed information.
Benchmark London Metal Exchange copper prices reached all-time highs earlier this year, having been on a sharply upward path since the end of 2005. ($1=A$1.33)
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