Taking The Pulse Of London’s Small Cap Mining Scene At This Year’s Master Investor Show: The Prognosis Is Good
By Alastair Ford
minesite.com
Smaller capitalized miners were out in force at Saturday’s Master Investor show, held at the Islington Business Design Centre in north central London. Precisely why miners were so over-represented at this retail-focused investment trade show – one of London’s biggest - isn't entirely clear. It could be that the mining industry has been fairly fleet of foot in reacting to the global recession, and is already looking forward to better times ahead. Certainly strong gold, silver, and copper prices have been helpful to anyone with exposure to these metals. And there’s optimism in the industry that a combination of global stimulus money, plus continuing – albeit slower – growth from China will combine to boost prices in the face of production cutbacks that have already kicked in. All of which might mean that when the local mining companies received the sales pitch from the good folk at Rivington Street Holdings, the hosts of the Master Investor Show, and indeed the owners of Minesite, they were simply feeling better about telling their stories to the world than companies in any other sector.
Counting Lonrho and two mining-focused investment funds there were, on Minesite’s rough and ready reckoning, 25 exhibitors from the mining sector. Stewart Dalby, the editor of our sister site Oilbarrel.com, counted four from the oil space. There were 99 stands in all, so miners took more than a quarter of the space available. Generally they reported decent levels of interest too, though there were also opportunities for snoozing throughout the day, as true to the form of the sector several delegates brought hangovers with them from the night before. For the smaller London-listed miners the attraction of the Master Investor Show seems to be the same as it is for many other listed companies in the smaller capitalized space – a chance to communicate with retail investors. In mining, at least, the area of your current writer’s expertise, retail investors can have an influence out of all due proportion to the size of their holding. This is because the share registers of most small companies tend to be dominated by a few major investors who are invariably long-term holders. There are thus only a few shares that ever change hands, those held by the humble retail investor. Since these are the only ones traded, these are the ones that set the price – sometimes to the immense frustration of company directors.
Thus we ran a story last year, at the height of the credit crunch, about an Australian gold company that dropped in value by over A$8 million on the back of one tiny trade, after brokers marked the stock down and down and down until a buyer eventually came in. Remember those days? Buyers were like gold-dust. And in an exercise of almost morbid – certainly bloody-minded – curiosity, the directors of the company in question, Adamus Resources, did a bit of financial forensic detective work, and determined eventually that the seller was not some sort of sinister manipulator of markets like Master Investor Show speaker Evil Kneivel, but a woman who needed money to replace a broken down washing machine. The size of her trade rang in at a mere 5,100 shares, which changed hands at an even more modest sounding A$867. The five cent discount she was prepared to take on the previous day’s price in order to get the funds for her washing machine into the bank took Adamus shares from A22cents to A17 cents, and that added up to an A$8 million drop in value. Oh yes, ladies and gentlemen, in some circumstances retail investors matter very much indeed.
Of course if you’re bang out of money, then no amount of marketing will help. But many of the miners that aren’t yet producing still have large cash piles, raised during the good times and not yet spent, partly because mining is by nature a long lead time industry, and partly because some sophisticated investors don’t mind if their gold hasn’t yet been mined, and are therefore less reluctant to participate in further rounds of fundraising. The thinking from these investors is that where-ever the gold is - in the ground or in a vault - it still bears a relationship to the gold price, and as such is investible. That’s why the Americans like Algy Cluff’s Baomahun gold project in Sierra Leone so much. Nevertheless that kind of thinking is more at home at the key industry events for the City's big players in mining, Mines and Money, and Indaba, where, at least in theory, brokers, miners, and investment funds, all get together and plan the future of the mining industry together. Less room for the humble retail investor at these events, too, especially as they are held on working days, rather than on a Saturday like the Master Investor Show. But the big money goes to Mines and Money, and Indaba, and that's is why more of the foreign listed miners attend the latter two events than attend the Master Investor Show, where the mining contingent was dominated this year by the London-listed crowd looking to shore up their local retail interest.
Having said that, Canadian-listed First Majestic made a very honourable exception at the Master Investor Show, and attracted a lot of interest too. This wasn’t just because production is stepping up a notch as more silver mining capacity comes on stream in Mexico, but because the company had actual silver bars and coins at its stand. What’s more they were for sale. Business was quite brisk, reported Keith Neumeyer, chief executive, even allowing for the premium he was, and still is, charging over the spot price. First Majestic actually sells around 12 per cent of its total silver production in the form of its own minted bars and coins, sales generated though its website. So hats off to Keith – not only was he doing a fair marketing job for First Majestic itself, but he was also booking sales. Not many other companies at the Master Investor Show actually left with more money in their pockets than they arrived with, but First Majestic did. Incidentally, attention silver bulls: Keith reckons silver’s going to US$50 within two years.
On the speakers’ stand at the centre of the hall the usual suspects carried on much of the usual sort of business, and attracted a fair amount of interest from the usual sort of punter. But on the floor, and among the booths and stands, it was possible for a few brief hours to take the pulse of London’s mining sector, through a select sample. Robin Andrews, former chief of Angus & Ross, a one-time aspiring zinc miner that’s now moving back into gold, was treading the boards, keeping his eye in, on the lookout for deals and contacts no doubt for the group of former BHP Billiton executives he’s now in cahoots with. Dave Lenigas was another well known face, all smiles, but candidly talking of tough times in the still recent past. Martin Rosser of Alexander Mining was all smiles as he expounded on the prospect of future royalties on his company’s proprietary ammonia-based base metals leaching technology. Smiles too from Belmore’s Pat Mahoney. And why shouldn’t he be smiling? – Lundin Mining’s paying for all his drilling. Meanwhile Kerim Sener of Ariana had a nice video of the first blast at his company’s Kitziltepe gold project in Turkey, a spectacle that to the layman appears simply as a hill being blown up by a series of well placed explosives charges. In the video it takes a long while for the fuse to blow the charges, and it then takes a long time for dust to settle. You get the feeling the same is true of this market. But when the dust does clear, the survivors that will gradually emerge will be leaner and fitter and stronger. Read about them here first. |
