hillman said:good morning all...wot do u think will happen tomorrow???? i think we will be smiling!!!!
good question...not sure...i just hope that the aum shares hold up well tomorrowaobed said:Out of curiosity is there a particular period within which a company must provide announcements? For example, do announcements need to be provided during normal trading hours?
Stop_the_clock said:Yes its going to be a very scary day for investors. Plenty of media articles speculating both good and bad news.
Hope for the best for whatever tomorrow brings
That Poseidon Feeling
By Alan Kohler
How resource stocks have moved
PORTFOLIO POINT: Australian Mining Investments has already jumped and could go a lot further, or it could fall again. Either way, it has brought the focus back to Australia’s undervalued resource sector.
On October 1, 1969, a couple of months before I started work at The Australian's Melbourne bureau at the beginning of 1970, the directors of Poseidon NL announced to the stock exchange that the company had intersected 40 feet of massive sulphides at Windarra in Western Australia, assaying 3.56% nickel and 0.55% copper.
The second decimal place in the two assays gave the thing extra credibility, even though Trevor Sykes later wrote in The Money Miners that there was no basis whatsoever for such exactitude, or even an approximation for that matter. The real assay was actually much lower.
Anyway, up to that day Poseidon was a little-known exploration company and the Australian stockmarket had been drifting for about a year. The mining boom that had been started by the heavyweight Western Mining Corporation's Kambalda discovery some years earlier, and between mid-1967 and August 1968 the market had risen dramatically. But during 1969 prices actually fell.
Until Poseidon came to the rescue, that is. On September 24, the day Poseidon's geologist, Godfrey Hyde Ruthyen Burrill, pulled the drill core out of the Windarra deposit, the non-ferrous metals share price index was 3892. A week later, on the day of the announcement, the index was 3980. At the time of Poseidon's annual meeting on December 19, when chairman Norm Shierlaw told shareholders that one of the world's great nickel mines would be built at Windarra, the index was 5101 and then in the following 10 days it ran up to 5870 ”” an increase of 50% in three months.
Poseidon itself went from 80 ¢ in September 1969 to a peak of $280 on February 10 1970, which was a bit more than a week after I started work as a copy boy on February 2, making a dangerous number of coffees for Bryan Frith, who was then writing a daily column called Fossicking.
I've been reminiscing about all this lately because of Australian Mining Investments, which announced, on Independence Day this week, an intersection from its Rocklands prospect near Cloncurry in Queensland of 40 metres of 5.05% copper. Note the second decimal place.
Not that I'm suggesting AMI is another Poseidon, or that its chairman Wayne McCrae is another Norm Shierlaw. Apart from anything else, McCrae is, as you read this, in the dust and heat at Cluncurry, in a hard hat, probably driving the drilling rig. Moreover, McCrae has already put all sceptics of his copper discovery on notice with a colourful rejoinder in this morning's Australian when he told a mining reporter "If you want to know what the definition of a ******** is, these guys (the doubters) symbolise it."
But how about this: between early September and October 2, 1969, Poseidon’s share price increased 15 times, from 80 ¢ to $12.30; between June 6 and July 6 2006, AMI's share price increased 15 times, from 47 ¢ to $7.11. It was then put into a trading halt pending yesterday. The company is not expected to make any announcement on the discovery until next week.
Poseidon's Windarra find and AMI's Rocklands are examples of "hunting in elephant country" ”” that is, near big known deposits. Windarra is near Kambalda and Rocklands is near Mount Isa.
Gold in the sands
Another episode of the same thing was in the late 1990s, when Helix Resources and Mt Kersey Mining announced they had found gold under the sands of the Murray Basin, not far from the massive Olympic Dam mine. The share prices of the two took off like rockets, taking the exciting the mining sector as well. Helix went from 26 ¢ to $3.20 and then all the way back again and is now 11 ¢. Mt Kersey eventually became Gutnick Resources NL before going to the great outcrop in the sky. Oh, and by the way, there is no gold mine in the Murray Basin (although there is a small nickel mine at Windarra).
This week every explorer with leases around Cloncurry has been going off in a shower of sparks; for example, Exco Resources was up 37%, Universal Resources up 47%. And there is plenty of talk about AMI, from one extreme (that it's potentially the greatest copper mine in the world) to the other (that it's "ludicrous" and that investors should "take their money and run").
But although the whole thing is quite diverting for stockmarket nostalgia buffs like me, there is a very important serious side for investors to the spectacular rise of Wayne McCrae's AMI.
For the past 12 months, we at Eureka Report have been telling you that resource stocks were undervalued by Australia's investment institutions because they have been underestimating commodity prices. Analysts have been ”” and still are ”” valuing mining and energy companies on the basis that commodity prices will fall substantially from current levels over the next few years.
If you took our advice last year you would have made a lot of money, even after this year's correction (which we also warned you about).
Despite the pop in metal prices in April/May and the subsequent correction in both commodities and share prices, we think the analysts are wrong and that, on the whole, that commodity prices will not fall and that mining companies are still being undervalued by the institutions. Today's articles by Mike Mangan and Charlie Aitken look in detail at several examples of this, but there are more.
We don't think the United States will have a recession and we think that China and India will both continued to modernise at roughly the current rate, possible for decades. London Metal Exchange stockpiles of all metals are historically low and supply will take years to respond to current high prices because of the lead time needed to build new mines. In any case, continuing consolidation in the mining industry means that fewer and fewer companies are controlling the supply of the metals that China needs, so there may never be commodity gluts again … at least for the foreseeable future.
The only real risk to this scenario is that the world's central banks go too far with the current global round of interest rate increases and cause synchronised recessions in the US, Europe and Asia. So buying resource stocks at present is, to some extent, a bet on the wisdom of Ben Bernanke (US Fed), Claude Trichet (European Central Bank) and Toshihiko Fukui (the Bank of Japan governor who is, by the way, in all sorts of trouble over alleged connections to insider trading).
Notwithstanding the prospect of tremendous volatility over the next few months as the markets test out and obsess over Bernanke, we reckon this is a reasonable bet. The Fed won't go too far -”” it will raise rates one more time, at most, and then stop. The profligate, debt-laden consumer of America won't exactly be bailed out again, but they will get a soft landing in the housing market as a result of the end of rising interest rates and the US stockmarket will rise steadily, if not boom.
What's the relevance of all this to Australian Mining Investments? Well, if commodity prices stabilise from here and resume their climb and the Rocklands deposit is confirmed as substantial, even if it's not quite the world's greatest copper deposit, then there is a good chance that the entire sector will be re-rated quickly.
The institutions simply cannot afford to miss out on another leg of the long resources boom, and they will join the punters who have making huge money up to now.
What's more, once fund managers and analysts come to believe in the sustainability of commodity prices, then the risk that is currently priced into resources stocks will be removed and the best of them will be rated on industrial company price/earnings multiples. Stocks such as BHP Billiton, Rio Tinto, Zinifex and Oxiana will rise significantly.
I think that unless Australian Mining Investments' Rocklands discovery is quickly exposed as a fraud or a mistake, as the sceptics expect, then not only will AMI go to more than $20, it will have a profound effect on the entire mining sector.
It is truly one to watch.
feeding_the_fire said:I actually have a question which may seem dumb, but got me thinking when asked to me.
Why exactly are people willing to pay more for shares in any mining company no matter how big the find?
OK, it seems obvious. But I tried to explain it to a friend, not very successfully…
I explained that the shares were worth ~30 cents, but then they (maybe!) found $18 billion worth of copper, so up goes the price. OK, came the reply, but why does that fact alone mean people are willing to suddenly pay $10.00 a share? What intrinsically has changed due to this $18 billion find? – will you get paid out more per share in dividends? “Err… No..” I said. “I don’t believe they pay dividends.”
So what then?
Is the only reason people buy hoping that other people will be? Fundamentally, why are people suddenly willing to pay $10.00 a share? If these results are confirmed, what would fundamentally change that would make you willing to pay even more? Why does a big find suddenly make a share more inviting, especially considering no dividends are paid?
Or is it simply everyone buying on the hope someone else will buy with the same hope…
I guess this whole question really goes to why people trade, but it got me thinking! Any insights from anyone? Cheers!
feeding_the_fire said:What intrinsically has changed due to this $18 billion find?
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