>> borrowed off another thread. if you believe this then cmr would have to be safe ,re takeover. as my old money used to say "no money no honey" Dryblower measures the bottom Monday, 6 October 2008 - MINING NEWS -
IF LAST week was not the bottom of the worldwide market meltdown then Dryblower reckons we are getting awfully close for one very simple reason – the rising tide of small miners with more money in the bank than their market capitalisation.
With cash having forcefully reclaimed its throne as the king of all assets, and the bizarre sight of the banks themselves actually scrambling to get their hands on cash, it is crystal clear that we are at the bottom of this ghastly cycle, or jolly close to it.
The cash test, where you can buy $A1 for 90c (or less) is the first in Dryblower’s patented “market bottom measuring system” – known to his best friends as the MBMS.
There are aspects other than the cash test to the MBMS, such as spectacular float flops, mothballed mines, and geologists returning to their “other” job of taxi driving, but we will get to them later.
First, let us consider what the cash test means because unless old man Dryblower has lost his marbles this means that the world of exploration is about to switch focus from remote bush camps to inner city locations, such as North Sydney and West Perth.
“Money mining” is what Dryblower’s one-time ping-pong partner, Pierpont, called the process through which we are about to pass.
Rather than bother with renting a Land Cruiser and hiring a few bothersome field hands to kick rocks somewhere beyond Broken Hill, the men in suits will start their exploration with a review of the current crop of annual reports, and the September quarter cash reports which will soon start flowing into the stock exchange.
Needless to say this is a much cheaper, easier and more profitable pastime in a market downturn than actually doing something constructive, like make a mineral discovery.
If any reader wonders why mining money is so attractive just remember that investors are only in the game to maximise the return on their capital and right now there are no profits to be made from extracting virtually anything metallic from the ground.
The zinc price crashed months ago. Nickel and aluminium followed. Copper was flushed away last week, the oil price is falling, and the much-heralded uranium boom is struggling to get off the ground.
What is left on the exploration agenda? Obvious, isn’t it. Cash. It has become the world’s most valuable commodity and any company which has it has become an “exploration” target – where target is spelled t.a.k.e.o.v.e.r.
After the cash test let us consider some of Dryblower’s other MBMS tools, such as float flops. Last week was a lulu in that department with what can only be called an utterly astonishing demonstration of wealth destruction by two floats, Queensland Mining Corporation and Aluminex.
It is a very long time (as defined by the word “never”) since Dryblower has seen a company float at a 70% price discount, which is what Aluminex did, or an even more spectacular 76% discount which was the trick performed by Queensland Mining.
Little wonder that the new floats register at the ASX has dropped to 13, a fraction of the boom-time list, and of those 13 still named two have “application withdrawn” against their names, five more have “to be advised” and only one appears to be a pure mining float pushing ahead into a very treacherous sea of selling.
The mothballed mines test comes in variety of forms. There is the “conserve cash” approach of Vital Metals, the “difficult market conditions variation” of Vulcan Resources, and the “retreat to the surface” of Poseidon Nickel.
Call it what you like the end result is a quick trip to Coles for a packet of naphthalene to pop in the bottom of the company accounts filing cabinet.
Geologists in cabs are yet to be sighted, but Dryblower is open to emails from readers who might have spotted one – a sort of variation on the game played by readers of the Times in London who have an annual letter writing competition about who spotted the first daffodils of spring.
And, of course, there is the MBMS test we all hope will not be applied but fear that it will – the first dot.com conversion of the downturn.
Whatever your preferred test, the awful truth of today’s commodity and stock markets is that we are up that well-known creek, without a paddle, and it will be some time before we find a way out.
CMR Price at posting:
45.0¢ Sentiment: Hold Disclosure: Held
