Signs of life in junior mining?

Strong share price gains, if not exactly common, are at least now occasionally happening.

Metal Tiger shares have more than quadrupled since February.

Some of the dread tension seems to have gone out of the junior mining sector. To be sure, times are still tough, fundraising is incredibly hard, and equity valuations are not a patch on what they were five, or even ten years ago.

And yet…

Since Christmas some junior miners have been on the receiving end of significant support in the market. Strong share price gains, if not exactly common, are at least now occasionally happening.

And there are not just one or two examples, there several.

Take Metal Tiger (LON:MTR), whose shares have more than quadrupled since February, Firestone Diamonds, whose shares have risen by 60% since November, and Berkeley Energia (LON:BKY), whose shares have risen by 25% since mid-December and by 100% since June 2015.

Then there’s Anglo Pacific (LON:APF), up by nearly 20% since the beginning of March, Condor Gold (LON:CNR), up by more than 100% since January, and Connemara Mining (LON:CON) up by around 60% just in the past couple of days.

These are not isolated examples. Over in Canada shares in Great Panther Silver (TSE:GPR) have risen by over 100% to C$0.96 since January, while shares in Fortuna Silver (TSE:FVI) are up by more than 60%.

So what’s the deal? Several things have happened. First off, the gold price has reversed the relentless downward trend it had been on since peaking at nearly US$1,900 an ounce a few years ago.

Alright, so it’s not exactly on an upward tear, but it’s fair to say it’s been rangebound between about US$1,200 and US$1,280 an ounce for some time now. And it was the leap back towards US$1,300 that really caught peoples’ attention.

Suddenly came the realisation that although things have been hard in the gold space for a few years now, gold is still as active and as useful as an all-purpose safe haven as it ever was, and bad news in the global economy will always feed through and support the price.

The Fed’s gambit in raising rates hasn’t exactly put a floor under the dollar, and the differing opinions of the FOMC, otherwise known as the Federal Open Market Committee, which are daily being bandied across the airwaves, hardly go towards creating a climate of certainty.

In this type of environment gold can do well, but after the long period of sustained gold price falls it seems the market did need something of a reminder.

Paradoxically, it’s not just gold that’s been on a recovery trend though. Contrary to the expectations of most analysts, iron ore has apparently bottomed out, the oil price has come back from its precipitous decline, and copper, at seven year lows, now seems to be wavering between bearish sentiment about oversupply and its use as collateral in the carry trade and a more upbeat longer-term view about increased demand.

Meanwhile, Capital Economics put out a positive note in regard to zinc, and even the silver price is up 7% since the start of the year.

In an environment like this it’s not surprising that investors are starting to take notice and to sniff around for opportunities.

And it’s noticeable that one or two larger fundraisings have been going through too. Condor Gold managed to bring some significant Canadian investors onto its register this week, with Ross Beaty alone taking £1.5 mln worth of shares as cornerstone.

This is not the rats and mice business of £150,000 stop-gap fundraisings that we’ve seen so many of since the downturn began all those years ago.

But before we get too carried away, it isn’t necessarily the start of anything big either. Worth noting that nickel hasn’t really moved yet, and remains down at multi-year lows, and that the aluminium and tin prices have both dipped over the past six months. That, combined with the mixed views on copper can still be used to construct a bearish view on base metals, based in large part on slowing Chinese demand.

So this is not exactly a benign environment. But it is now an environment where it’s beginning to look as though companies with ideas, know-how and assets are likely to find support if they go looking for it.

And are likely in turn to be able to deliver due reward to those investors willing to be bold enough to dip a toe or two back into the market.


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