Resource stocks mine new territory
By Bruce Hextall
Bill Stubbs recalls vividly the last time he met Kerry
Packer to do a deal. Australia's richest man complained
that he would have to lie down while they talked, saying
he had "the sorest arse in Sydney" because of riding
lessons he was taking in his quest to become a first-class
polo player.
Mr Stubbs, who was running mining hopeful PacArc
Minerals, did the deal, selling Packer's Muswellbrook
Energy some mining tenements in Indonesia and the
Philippines.
PacArc got Muswellbrook scrip in return, selling out for
a tidy sum before Packer eventually abandoned his
attempt to outshine his father by making money out of
mining - after dropping well over $150 million.
Since then, PacArc has done little other than dabble in a
few exotic offshore plays. Now PacArc could be
changing direction again. If the speculation is right, the
company may soon find itself entering the same field in
which Packer's son James has shown exceptional
confidence - the booming internet market.
PacArc is expected to become the latest of a string of
almost dormant mining juniors to reinvent itself as an
internet-related stock.
It seems likely after a new investor snapped up a large
block of shares in the company, according to Mr Stubbs,
who is still a PacArc director.
Having run with the nickel boom and been in on the
ground floor of some decent runs in the resources sector
since then, he understands the value of blue sky and how
to make money out of it.
"The trick is not to be left standing when the music stops.
It is as simple as that," he says.
Mr Stubbs admits he knows little about the move onto
the PacArc share register by a Melbourne-based
technology company looking for a public outing.
PacArc's board has yet to receive any proposal from the
new shareholder, but the company copped a speeding
ticket from the Australian Stock Exchange, which queried
its price rise.
The hint that the company might actually be doing
something for the benefit of shareholders other than
toying with ideas such as gold mining in Mongolia stirred
a few players to pick up the stock, pushing the price up
from 11¢ to 16¢.
It was inspiring stuff for a company with only $43,000 in
cash at the end of the December quarter and not a lot to
tell the ASX in reply to its query. But that is likely to
change if a technology deal is stitched up.
The Brisbane-based outfit is not alone. Desperate and
dateless, junior exploration stocks with little cash after a
long drought brought on by low commodity prices have
suddenly discovered their most valuable asset is their
listed corporate structure.
They represent ideal vehicles to bring fresh technology
plays to the market - their shareholders are typically
investors who enjoy speculative plays. "They're
demanding exposure to internet stocks because there's
not much happening in the mining sector," said one
broker now finding himself increasingly dealing in the
technology stocks.
"It is a little different when it comes to working out value
but I just close my eyes and think of them as nickel
stocks," he added.
Mr Stubbs agrees, saying the internet boom is not that
different to the nickel boom he remembers. "Out of 100
only two or three will probably make it, but you've got to
be there," he says.
One of those prospects has been Golden Hills Mining.
Now run by 34-year-old techno-whizz Steve Moignard,
the company has been renamed Davnet and is well
entrenched in telecommunications. Its shares are now
trading at 33¢, but before reconstruction and a $2.4
million equity injection they were trading at 2.5¢.
The company is now capitalised at $67 million largely
because of the blue-sky potential - the same potential
that has driven past gold and nickel booms - one of the
most recent being South Australia's Gawler Craton gold
boom.
One of the participants in the 1996-97 boom was Merritt
Mining. Its shares shot up to 24¢ from 11¢ as investors
scambled for Gawler Craton stocks before falling back
as enthusiasm faded.
Since then it has been struggling to replenish funds for its
exploration program. Retaining some exposure to gold
through a Gawler joint venture with BHP and investment
in Victorian gold junior Alliance Gold Mines, the
company has now launched itself into cyber world.
Last month it formed a technology division to acquire a
mobile phone and internet provider business and an
electronic smartcard system.
The Perth company's managing director, Mr Peter
Andrews, says it is appropriate for his company to chase
blue sky wherever it may be. "It would be careless to
spend all the money on grassroots exploration and not be
able to replace it," he says. "This brings with it real
business and real people. It is better than spending our
remaining funds on exploration."
Mr Andrews, the company's largest shareholder, will
seek a mandate from shareholders to change the
company's direction and its name to Impress
Technologies.
The move impressed the market. Merritt's shares have
jumped from 4¢ to 11¢, where they still sit, capitalising
the company at $6 million.
Other juniors to seek their fortunes outside the resources
sector include Ocean Resources, Border Gold, Growth
Resources, Cape Range and the ever-versatile Mr Chris
Kyriakou's Walhalla Mining Company.
For shareholders it has been a mixed experience.
Mr Kyriakou's Walhalla, whose shares jumped from 8¢
to 39¢ in late February, plans to invest $1 million in an
internet filtering system for children. The move added
around $15 million to its market cap.
Border Gold, a Perth-based explorer is spending $1.9
million investment in the electronic commerce market.
Investors initially jumped at the deal but its share price
has slipped back from a high of 25¢ to trade at 17.5¢.
Border management will continue to focus on its core
gold project at Karonia and the recently acquired,
under-option Beryl Hill-Arthur River tantalite-columbite
project.
Davnet is by far the biggest play. It expects to boost its
revenue by more than $40 million a year after signing a
deal to provide internet telephony services, including flat
rate inter-capital calls 30 per cent cheaper than other
carriers.
Ocean Resources' share deal with a group called
Goalmappers briefly pushed the struggling explorer's
shares up from 3.4¢ to 7¢ but enthusiasm soon faded
and the shares are back at 2¢. Meanwhile, Mr Yosse
Goldberg's former partner, Mr Ron Wise, recently
reinvented his listed vehicle, Cape Range, as a
telecommunications investor.
Merritt's Mr Andrews says most shareholders are
comfortable with the concept of moving from exploration
to technology. "Junior resources companies are
effectively entrepreneurial companies - they are used to
that."
They're also used to taking a bit of a risk if there is a
chance of a big return, says Taylor Collison's Mr David
Whiting. "I think it will be great for shareholders wanting
to get out of their favourite dog," Mr Whiting said. His
clients have been keen buyers of internet and telco stocks
but are well aware of the risks.
He says there will be only one or two winners but in the
current climate the move to technology stocks is not a
bad option - every time a mining stock starts a run it hits
a brick wall.
"It would be useful to see who is staying in mining and
then back the rest," he said.
afr.com.au
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