PURE SPECULATION: Robin Bromby | September 15, 2008 TWELVE months ago, this was a boom that was never going to stop. Now, with the credit crunch eating its way into the resources sector, the vultures are waiting for the first stricken junior to fall in its tracks, presenting a carcass for the picking.
Adrian Day of Queensland Gold & Minerals (QGM) has the feeling the vultures are already working on their prey.
Sure, QGM is an early-stage explorer, and these companies are greatly out of favour at the moment, but at least one of its projects must look pretty good: after all, just last month Newmont Mining Corp (NEM) signed a heads of agreement to jointly explore the junior's Malcolm Creek gold-tin-tantalum project, 40km south of Forsayth in northern Queensland and 70km from the Kidston mine that produced 3 million ounces of gold.
QGM is not traded often: in fact, its shares have moved on only four days in the past month, and usually that is in low volumes, as on September 5 when 50,000 shares went through to close at 2.5c.
But on Thursday, 2.28 million went through at 1.3c, shaving 48 per cent off the company's value, making it worth just $680,000. That started the alarm bells ringing.
The first explanation is that this is just one or more distressed sellers, and there are plenty of those out there.
That explanation would fit for the selling. Indeed, that person or those people wanting to quit the stock probably couldn't believe their eyes when they saw all those buyers on the other side.
We did a random sampling of some other juniors and found there was typically a very skimpy "buy" queue, in one case there being but a single hand up to buy the stock; it's a given that, in a bear market, buyers evaporate.
But even at Friday's close, there was a long list of buyers for QGM, including two offering 1.3c and another two at 1.2c; further down the queue, one investor was in the market for 1.25 million shares in this company.
As to why there were so many buyers, we do have a few clues. It turns out that there have been several approaches to QGM in recent days by people wanting to buy the company as a shell. And then there are the 13 million new shares that have been approved by shareholders but have yet to be issued and when they are will represent about 20 per cent of the company. QGM has been fielding calls from brokers wanting to buy the 13 million new shares.
Why would brokers be so keen to get shares in a small junior in the present climate? QGM has promising projects but will need to find money somewhere. It had $466,000 in the bank as at June 30, after spending $358,000 in the June quarter.
QGM Price at posting:
5.2¢ Sentiment: None Disclosure: Not Held
