Second stage of mining boom kicking off

Second stage of mining boom kicking off

If you think the World Cup final tomorrow will be exciting, what about the Australian Mining Investments results later in the morning? Yes, a nation holds its breath, not for soccer, but for the prospect of a second wind to the mining boom.

AMI is a tiny copper mining company from Cloncurry, Queensland, the stock price of which has gone from 38¢ at the start of June to more than $7. And nobody is willing to bet that the share price trajectory has run its course just yet.

It seems AMI is sitting on the biggest mining find in many years. The company has already indicated that it has more than $10 billion worth of copper. Believe it or not, this copper lode appears to have been smack in the middle of an area that big mining companies such as MIM had passed by many times.

Let’s hope AMI produces clear evidence tomorrow that it really has hit the jackpot. It was supposed to file a full report on the discovery on Friday afternoon but held the announcement over the weekend.

Whatever happens, it’s significant news because, unlike the rest of the big stories in the mining sector last week – and it was a very big week indeed – the AMI story was about a discovery, and there have been precious few in recent years.

The ASX needs new companies rising through the ranks to counterbalance foreign takeovers.

Peabody, a privately held multi-national, announced mid-week that it was to buy Excel Coal, a mid-sized miner, for $1 billion.

There was also a flutter of nerves as Newcrest, Australia’s biggest (and arguably worst) gold mining company, appeared to be in play.

Many investors, even brokers, would bemoan the loss of a $1 billion company such as Excel. But there are more than 100 gold companies still left on the stock exchange.

You’re looking at a genuine renewal process unlike, say, the banking industry, which consolidated in the 1990s and then froze into an oligopoly. In 1995, there were 13 listed banks. Today there are eight.

What really matters is that smaller mining stocks are about to fire up as the second phase of the resources cycle sees interest swing to junior players. If you want an indicator of just how hot this junior sector is becoming, look no further than Kalgoorlie, where the annual Diggers and Dealers forum held every August is already booked out. I tried to find a room in the town last week and it’s impossible. “We’ve even heard of people renting out rooms in their homes,” said Georgia Benson, front desk manager at the All Seasons Plaza (no vacancies).

The vast majority of brokers and fund managers just look at the top 200 stocks. Ironically, it seems the only people looking at the mid-to-small cap miners are multinational acquisition teams and mum and dad investors. Basically, there are few if any bargains in the upper reaches of the ASX because they are over-researched by broking houses.

But among the junior miners, it’s anybody’s game. A bit like the World Cup, when you come to think of it.


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