December 28, 2010Australian Investors Get A Christmas Float...

December 28, 2010

Australian Investors Get A Christmas Float Surprise.

By Our Man In Oz / www.minesite.com

Floating a company just before Christmas has usually been a rather dopey idea. Not this year in Australia where the market is finishing 2010 with a flourish, and with January looking even busier for initial public offerings. Mining stocks in particular have starred on the ASX over the past three weeks with investors shunning the shops and trading hard all the way to Christmas Eve. There hasn't been a single trigger for this outbreak of optimism, more a gut feeling in Australia that 2011 will be a bumper year as exports of minerals and food struggle to keep pace with Asian demand. High commodity prices are, however, just part of the story. There is also a head of steam building in the mergers and acquisitions area as cash that has been sidelined for the past two years pours back into the market.

Consider a few numbers. Over the past six months 61 new companies listed on the ASX, roughly half of them in the resources sector. Out of those new floats 20 could be considered failures with their current share price below the issue price, a ratio of roughly one-third failed and two-thirds successful. But, since the start of December the ratios have flipped around with 27 new listings in just 17 days and with only four failing to hold, or better their float price, a failure rate of around 15 per cent or, more importantly, a success rate of 85 per cent - odds that guarantee support for the next 42 stocks which have paid their initial fee at the ASX and are moving towards a listing day.

Promoters of the next crop of floats will be hoping to replicate the remarkable success of some of December's listings such as Middle Island Resources (MDI), an African-focussed gold explorer which listed its A20 cent shares on December 16, posted an opening sale at A52 cents, and then steamed upward to a high of A55 cents this week.

Impressive as that performance looks it was matched by two other floats. Haranga Resources (HAR), an Australian-based stock with coal interests in Mongolia, listed its A20 cent shares on December 9, posted an opening sale at A55 cents, and then headed on up to A58.5 cents this week. Just to prove those two money-doubling performances weren't flukes another coal stock, Carabella Resources (CLR) listed its A40 cents shares on December 17, posted an opening sale at A$1.10 and then hit A$1.35, before easing to A$1.13.

The December change in float performance has been noticeable in a number of ways, and might reflect more generous pricing by promoters, or an increased investor appetite - or both. Whatever the reason not a single new float in December flopped on debut whereas 10 dived underwater at their first sale in the previous five months. Apart from the stocks delivering a 100 per cent (or better) return over the past three weeks there have been a series of double-digit winners, including:

Sheffield Resources (SFX), floated at A20 cents and now trading at A29 cents (a 45 per cent gain since its December 15 listing day). Sentosa Mining (SEO), floated at A20 cents and now at A26.5 (up 32.5 per cent since listing on December 17). Renaissance Uranium (RNU), floated at A20 cents and now at A33 cents (up 65 per cent since listing on December 15). Oakland Resources (OKL), floated at A20 cents and now at A24.5 cents (up 22.5 per cent since listing on December 14). Attila Resources (AYA), floated at A20 cents and now at A46 cents (up 130 per cent since listing on December 8). Southern Crown Resources (SWR), floated at A20 cents and now at A39 cents (up 95 per cent since listing on December 2).

It is performances like that which has unleashed new-found interest in resource floats in Australia, coupled with an expectation that 2011 will be see the re-start of the resources boom which was slightly derailed by the 2008 financial meltdown. Seasoned watchers of the ASX, such as Robin Widdup, a former JB Were & Son broker and now the man behind the Lion Selection group, believes the market for small miners is yet to boom. On a "clock" he uses to track booms and busts, with midnight the bottom of the bust and 6am the start of the boom, he reckons we are currently at 5am, and looking down the barrel of a few very good years.

When you add the optimism of Widdup, and other older analysts who have seen the cycle before, it becomes easier to understand why there is a queue for listing at the ASX with next cabs off the resources rank including: MacPhersons Reward Gold (MRP), scheduled for Christmas Eve. Argentina Mining (AVK) on December 31. Altius Mining (AYM) on January 6. Centius Gold (CNS) on January 11. Alligator Energy (AGE) and Glory Resources (GLY) on January 12. Cove Resources (CVE) and Ventnor Resources (VRX) on January 14. Black Mountain Resources (BMZ) on January 21. Invictus Gold (IVG) on January 25 - and on into February where another seven mining floats have already pencilled in float days.