Dryblower: London chaps hungry for another ‘double-header’
30 April 2002
THE painful decline of WMC as a force in world mining is not just being celebrated in Australia. London too is in a state of shock.
How is it possible, Dryblower was asked a few days ago, that “you Aussies could let our favourite double-header slip away without a fight”.
It was comment common across The City from traders and speculators who have made their fortunes playing the Australian mining market, though it took a few days for the reference to a double header to sink in.
WMC, it appears, was a very special company in London because it gave a British investor the chance to double dip – once on the price of the stock alone as it rode the commodity price cycle, and again on the movement in the Australian dollar.
The game of playing WMC delivered whopping returns because, as a general rule, the company’s share price rose in sympathy with the gold and nickel price, as did the Australian currency. Anyone buying in British pounds saw their win multiplied, roughly doubled in most cases.
The problem today is that WMC is out of gold, and suffering a rare form of corporate schizophrenia – will it split into an alumina division plus a division best called “other commodities”, or will it stay a single unit.
Understand this bit of history, and yearning for the good old days, and you start to appreciate why there has been such a rapid move by small Australian explorers and miners to AIM - the Alternative Investment Market of the London Stock Exchange.
But, here lies another discovery made by Dryblower while chatting to The City chaps. WMC will be very hard to replace and most of the small companies which have made the trek over from Oz are not seen as anything special.
On the contrary, most are seen as modern day equivalents of The Money Miners so brilliantly lampooned by Trevor Sykes more than 20 years ago in his book of the same name.
A Money Miner, for the novice investor, is a company in business more for the sport of “mining” the wallet of an unsuspecting public than actually doing any real exploring.
If Dryblower’s sniffing of the wind from The City is correct then it goes a long to explaining why so few of the small Aussie stocks on AIM have done very well.
Quite simply, support for the small miners is not strong – yet.
Note that word “yet”, because there is a theory that the tide may be about to turn. Whether this is just a flicker of the eternal optimism which drives all speculators remains to be seen, though there are some critical events coming up.
First is the Minotaur effect, which is yet to really grab much attention in The City. The copper/gold discovery by Minotaur in South Australia has been noted but against a lot of background noise from competing investment attractions.
More Minotaurs, please, is the request from London.
Then there is the Kalgoorlie effect because, in a strange way, there is an affinity between The City and Kal. Generations of British investors have made (and lost) their fortunes when the mood of Kal rises, or falls.
If Dryblower had to make a bet he would say that London is waiting for Kal to click back into gear, and the event seen as the spark is Diggers & Dealers in August.
For the first time in years, The Chaps are planning to hit Diggers. Early inquiries are high and visiting teams being assembled.
If the mood continues to brighten then Dryblower is confident that a brigade of London dealers will invade Kal next August, which could be the spark to really ignite the small end of the Australian market because these guys have big shopping baskets, and clients with an appetite for fast profits, and fond memories of what a double-dip profit does for their account.
Smart punters might care to establish contact with the organisers of Diggers to see how many Brits are making their way south this year, because in a funny sort of way it serves as a pointer to the future health of the Australian marke
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