MELBOURNE AUSTRALIA 29 January 2007 – Well, we do admit that we are partial to a little bit of speculative, penny share action. The more speculative the better. In view of a little – a lot actually – bit of price action on Friday by one particular stock, we will keep close tabs on it over the next couple of weeks to see what materialises. But first…
The All Ordinaries powered further ahead last week with a 1.8% gain for the week, closing at 5,753.30. That takes the gains from the start of the year to 1.9%. So far it has been a pretty volatile three weeks, and with a lack in clarity of direction from overseas, that volatility looks certain to continue.
That being said, the one area that seems pretty clear on direction is China. Having posted another double digit growth gain for the fourth quarter of 2006, the demand for Australia’s raw materials looks bound to continue for the foreseeable future. Even when the Chinese economy stops growing in double digits, the chances are that it will take many, many years before it reaches the growth rates of a mature economy of between 1-5%.
Overseas, it wasn’t as strong a week for the US markets. The Dow Jones Industrial Average lost ground, retreating from its all time highs, to close the week down by 0.6% to 12,487.02. Most of the action occurred on the Nasdaq, where a number of technology companies such as eBay Inc. (NASDAQ: EBAY) and Microsoft Corp. (NASDAQ: MSFT) produced better than expected results. Even so, the index finished in negative territory as some analysts grew cautious about the outlook for technology companies over the next twelve months. The Nasdaq also ended the week down by 0.6%.
But the item that caught our attention the most over the weekend was the performance on Friday of tiny mining company Black Range Minerals Limited (ASX: BLR). According to the company website they are involved in, “Exploration and development of its 100%-owned Koonenberry Base Metal Project in New South Wales” and “Exploration and development of two advanced uranium projects” plus “Acquisition of addition quality projects in the resources sector.”
The website also tells us that “Following 12 months of intensive exploration the company recently recalculated the resource base at the Koonenberry Base Metal Project. This resulted in a 1,000% increase in the JORC inferred resource to… almost 60,000 tonnes of contained copper.”
Based on current market prices, that values the copper equivalent deposit at $442 million worth on the cash market, or around $375 million on a two year forward contract. This may be exciting, but is still a long way off the famous forecast from Cudeco (ASX: CDU) (formerly Australian Mining Investments) which stated in June of last year that it believed it had discovered 1.2 million tonnes equivalent of Copper at its Rocklands project in Queensland.
That news from Cudeco saw the companies shares rocket to as high as $10 before the shares were suspended from trading on the Australian Stock Exchange.
The news from Black Range Minerals didn’t spur their stock on quite so much, but still, it managed to tack on a 29% share price rise during Friday’s trading. But on what news? Nothing yet, and not a sniff from the ASX asking the company if they know of any reason why the shares should perform in such a way.
But, even if the ASX were to wake up, chances are that they would get a reply similar to the one they received from Black Range last year following a sudden price spike. In its four point reply to the ASX on the 8th May 2006 the company said that it “is not aware of any information that has not been announced that would explain the recent trading in the securities of the company.”
Of course, as anyone who has read a company response to an ASX query on price spikes would know, the format for these responses is almost identical. Why change anything if it’s good enough to keep the ASX off your back.
It could only have been either a coincidence, or the completion of a huge amount of work involving discovery, testing and evaluation of the results during the next two weeks that caused Black Range to issue a statement to the ASX informing investors that “The Company is pleased to announce that it has intersected significant intervals of high-grade copper mineralisation during its second phase drilling programme at the Koonenberry Base Metal Project.”
We shall be watching this stock over the next couple of weeks to see if we are blessed with a ‘surprise’ announcement to the ASX on some other good fortune that the company has received during its drilling activities.
And just in case you are wondering, your correspondent unfortunately does not own any Black Range Minerals shares, and by virtue of penning this article, will refrain from buying any. Oh for the good old days!