minesite: that was the week that was

itnersting roundup from minesite...with a lot of gasbagging about uranium hopefuls. Positive on EME though, which i have exposure in through JRL shares.

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That Was The Week That Was … In Australia

Minews. Good morning Australia, how goes your market?

Oz. Booming, again. But, without being too much of a Negative Nelly you would have to say that some of the business we’re watching is downright silly. In fact, oldtimers say they haven’t seen anything as daft since the tumultuous final days of the Poseidon/Tasminex boom of the early 1970s.

Minews. Is it that bad across the board, or are you just talking about the uranium sector?

Oz. It’s largely confined to the small uranium hopefuls, and that includes anyone who gets a tick from their Geiger counter as they wave it across any old patch of kangaroo-infested outback. Last week, just for fun, a check of stock exchange announcements found that since May, a total of 47 small mining stocks, and at least one ex-technology company, had re-invented themselves as uranium explorers.

Minews. Is it really that many?

Oz. You could have full call of the card if you like but names worth mentioning are Arafura, Matrix, Omegacorp, PepinNini, Alliance, Stellar, Bullion, Extract, Giralia, Korab, Bannerman, Nova, Marengo, Siberia, and the list just goes on and on in what is a classic demonstration of “address pegging”, or, in this case, “element pegging” because all that most of them have done is said: “we’ve got, or we’re getting, a piece of land which might, or might not, have uranium on it”.

Minews. And the result of that is a soaring share price?

Oz. That’s the trick, and while the game is hot a lot of money is being made, there is no doubt that it will come to a screeching halt very soon, and this is a good example of why.

On Wednesday, Redport (RPT) released a statement headed: “Redport takes stake in Kintyre Uranium Project.” The first line in the body of the statement said: “Redport acquires option over Kintyre Uranium Project”. On the strength of that 77 million Redport shares changed hands on Wednesday, which is about 21 per cent of the company’s issued capital. The price moved from a close on the previous night of A6.8 cents to a peak of A8.1 cents, up 19 per cent, before closing at A7.3 cents.

The dollars involved is not the issue. It’s the name Kintyre Uranium Project because, while technically correct, all that has happened is that Redport has acquired an option on a big block of land which surrounds Rio Tinto’s dormant uranium project of that name, and where the big miner has proved a 37,000 tonne uranium reserve, and is waiting for a change in the Australian political environment, which is happening, but slowly.

Minews. That certainly provides a useful snapshot into the games being played. Now, what about the rest of the market?

Oz. Strong throughout the week with zinc continuing to be the stand-out performer among the base metals, and gold stocks reacting modestly to the daily movements in the gold price. Zinifex (ZFX) set new 12-month highs on every day, rising from A$4.20 to an intra-day peak of A$4.61 on Friday before a last minute burst of profit-taking lopped it back to a close of A$4.56. Kagara Zinc (KZL) rose from A$1.44 to close at a new high of A$1.64 (up 13.8 per cent), and Perilya (PEM) was up from A74 cents to A86.5 cents (16.8 per cent). CBH (CBH) struggled up by half-a-cent to A29.5 cents.

Minews. A quick wrap-up now of other noteworthy moves?

Oz. Alkane Exploration (ALK) developed a little traction on good gold exploration news. It rose from A16.5 cents to a mid-week high of A25 cents (51 per cent) before easing at the close to end the week at A21.5 cents. Precious Metals Australia (PMA), the born-again vanadium stock continues to surprise. It gained another A42 cents (40 per cent) to close the week at A$1.42, but was trading at one stage on Friday at A$1.65.

Minews. Did you want to share any of those uranium hopeful share prices with us?

Oz. Why bother. What you see today will be gone tomorrow. There are a few genuine uranium players, but the vast number of “element peggers” is clouding the issue quite badly. Perhaps the best of the newcomers is Energy Metals (EME) which owns 53 per cent of the historic Bigrlyi uranium discovery. It floated on September 9 at A25 cents and closed last week at A$1.38, which is either a 450 per cent gain for foundation shareholders, or a 15 per cent loss for the courageous punter who paid A$1.62 for his parcel of shares on September 20.

Minews. Thanks Oz. Don’t get too anxious about the uranium players, it’s just a game.

Oz. And that’s the problem. Too many people are treating it as a game, but it’s one which has the potential to damage the entire mining sector.