With so much interest in the booming resources sector it is easy to understand the raft of junior explorers keen to etch their name on the Australian Stock Exchange board.
With so much interest in the booming resources sector it is easy to understand the raft of junior explorers keen to etch their name on the Australian Stock Exchange board.
But as some juniors have discovered, the market is as sceptical as ever when it comes to new ASX entrants, a point reinforced by a quick scan of Western Australian resources float results in the June quarter.
Just nine of the 17 proposed WA-based minerals exploration floats in the three months to June 30 this year were successful, with $32.7 million being sought from investors in total.
Patersons resources analyst Alex Passmore said a bear run in the All Ordinaries Index in the June quarter undoubtedly had an impact on some floats.
Between mid to late March and mid April, the ASX All Ordinaries Index dropped from 4,355 to 3,900.
The market was gaining ground prior to this downturn in the index, rising to 4,355 from its January end of 4,107.
“When the market’s running hot like that you start to see a growing number of listed cash-boxes trying to float,” Mr Passmore said.
In such a market, investors were much more likely to back management to do the job with very few assets, according to Mr Passmore.
Hartleys analyst Simon Tonkin had the view that the market was “pretty buoyant” with respect to new exploration floats.
“There’ve been an awful lot of exploration floats, considering the huge number in 2004,” Mr Tonkin said.
“They are continuing to float based around the higher metals prices, but some will have trouble later on.”
Mr Tonkin singled out iron ore as having enjoyed a good period in the June quarter.
Of the WA-based floats in the June quarter, two listed with the express purpose of finding and developing iron ore assets. Both Iron Ore Holdings and Murchison Metals have been well received by the market.
Shares in Iron Ore Holdings have risen from their subscription price of 20 cents to more than $1 in the four months since listing. The company has four iron ore prospects on its books near Newman.
Iron Ore Holdings was ranked as the second best performer in Deloitte’s quarterly IPO review for the June quarter with a return on its subscription price of 75 per cent as at June 17.
Murchison, which has the Jack Hills iron ore prospect near Meekatharra, floated at 20 cents and its shares have traded as high as 55.5 cents since listing in April.
Given that the markets were forward looking, Mr Tonkin said, it was unsurprising so many floats had been put on hold, with some predictions of an impending downturn in the prices of some metals.
Argonaut Capital executive chairman Charles Fear was less willing to put the phenomenon down to expectations of a downturn.
Mr Fear said the lack of successful floats was due to a lower “weight of capital looking for exploration floats”, with the market looking for production rather than exploration.
The largest WA exploration float during the WA Business News Exploration Survey period, Abra Resources, which raised $9 million and listed in April, has the aim of developing its namesake base metals project in WA.
Before listing, extensive drilling had been undertaken at the predominantly lead-silver site in the 1980s.
For all the hype surrounding uranium this year only one WA explorer claimed an interest in the metal during the June quarter, with the excitement only starting to translate into local IPOs post-June.
Bannerman Resources, which successfully listed in April, is aiming to develop two uranium sites in Namibia and one in WA. The most advanced of its projects, however, is considered to be the Pinnacles nickel prospect in WA.
Another prospective ASX uranium entrant from WA, Energy Metals, which emerged as a uranium spin-off from Jindalee Resources in mid-July, closed its $3 million initial public offer in August oversubscribed.
With a planned listing date of August 31, the float of Energy Metals had to be put on hold however, for problems in getting hold of a vital signature from one of its Aboriginal vendors in the Northern Territory, a company spokesman said.
It expects to list by the end of this week or next.
According to some in the market, there is a fine balance between being under and overcapitalised in the current climate.
Often, juniors needed to find the right balance in how much they sought from the market, Mr Tonkin said.
Exploration floats represent the single biggest sector in WA-based IPOs.
In total there were 11 floats on the ASX from WA in the June quarter, according to Deloitte.
