THE lesson from Maximus Resources' 100 per cent price jump on Friday is that the junior resources sector remains imbued with irrational exuberance and that investors shouldn't lose their collective heads.
Maximus on Friday announced an "exploration target" of between 1.7 and 3 billion tonnes of magnetite iron ore, at its wholly owned Canegrass project near Windimurra in Western Australia.
The next Fortescue? Not quite: the assertion is based mainly on "state of the art" computer modelling of geophysical data and is thus "partly conceptual".
On management's estimate, the largest of five targets hosts up to 3 billion tonnes with a 20-35 per cent magnetite content. Maximus now plans to drill some proper holes to test the headline claim.
Until last week, Maximus was better known for a gold prospect in the Adelaide Hills and a uranium tenement in Western Australia, but that's now been superseded by iron ore's unlikely sex appeal. Its shares yesterday succumbed to an inevitable bout of profit taking and fell by 7.5c, or 25 per cent. Likely sellers were the shareholders who got in at 20c through the company's $89.5 million rights raising last year.
Criterion rates Maximus an avoid. The drilling phase is unlikely to be nearly as exciting as the conceptual stuff. There may be something big down there, but the grades are low even for a desperate Chinese buyer.
