This is why i put my money in HOR recently as we increasingly see the consolidation of the spec market those that have all the boxes ticked like this one will survie and thrive at some point. Please read this as it explains it all and you will see why its a smarter buy here. The boys will be sorted from the men of specy's in the next 6 months then along with a more stable economy and change of goverment we will see the return of capital into specs.
Many small investors like to keep their eye out for cheap mining stocks that they hope might strike it lucky. They are known as speculative mining stocks or penny dreadfuls. There is always the chance that riches can made but regulators warn investors to be careful.
Susan Lannin Source: The Business | Duration: 3min 7sec
Topics: business-economics-and-finance, mining-industry, australia
Transcript TICKY FULLERTON, PRESENTER: Many small investors like to keep their eye out for cheep mining stocks that they hope might strike it lucky.
They're known as speculative mining stocks or penny dreadfuls. There's always the chance that riches can be made but regulators warn investors to be very careful.
Industry watchers say that some small resources companies could go under over the next year as the mining boom fades.
National resources reporter, Sue Lannin.
SUE LANNIN, REPORTER: Around 900 resources companies are listed on the Australian Stock Exchange thanks to the mining boom. The majority are junior explorers, also known as speculative mining stocks. Hoping to hit pay dirt and cash in.
SIMON BENNISON, ASSOC. OF MINING AND EXPLORATION COMPANIES: There are a lot of companies at the moment that are below the threshold where they'd like to be from a survivability point of view.
SUE LANNIN: And as the mining boom fades it's becoming harder and harder for mining hopefuls to stay afloat.
GAVIN WENDT, MINELIFE RESOURCES ANALYST: It's going to be very, very difficult for a lot of those companies to be able to keep the doors open for another 12 months because the cash simply isn't there in the market at the present time.
SUE LANNIN: Gavin Wendt say there are too many listed resources companies and they need to consolidate to survive.
GAVIN WENDT: We don't need 900 listed resource companies. We probably need 300 or 400 and we've probably only got the quality of project and management to sustain 300 or 400 companies.
SUE LANNIN: Investors need to look for a company which has a good project and a good management team which makes it easier to raise finance. They also need to understand what they're buying and whether the company has a chance of finding a mineral deposit which is economically viable to mine.
KEVIN LEWIS, ASX CHIEF COMPLIANCE OFFICER: When people release exploration results you need to be a geologist often to understand them. That's beyond the can of most mum and dad investors and they need to take advice in that space.
SUE LANNIN: Regulators are concerned that mining companies now and then overstate their exploration results to boost their share price.
KEVIN LEWIS: Companies are very quick to announce the good drill hole results but when they get bad drill hole results in close proximity they occasionally take a little bit longer to get those out and think they might need to do a bit more drilling around there to give them a better basis for making disclosure. We don't like to see that sort of cherry picking disclosure.
BRUCE DODD, ASIC: I think sometimes they get caught up in the excitement of it. It's more exciting than perhaps it is, and also the need to get capital in at an earlier stage to progress it to the next stage. All of that results in a few temptations in the way to, as you put it, gild the lily, a little bit.
SUE LANNIN: The mining industry says the problem is too much costly regulation.
SIMON BENNISON: We are seriously concerned about the cost imposition on industry at the moment and getting clever at how we can reduce those costs.
BRUCE DODD: I can appreciate that there could be a concern but the rules are the rules. If you know that you're underfunded in that area and you know you've got certain compliance to meet well that's something you've got to plan for.
SUE LANNIN: For investors it's a case of do your homework and look before you leap.
HOR Price at posting:
7.7¢ Sentiment: Buy Disclosure: Held
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