Investment Returning to Junior Exploration Sector

THE CONFERENCE CALLER: Queensland Government resources investment commissioner Todd Harrington opened the Brisbane Mining 2017 conference this week by acknowledging the recent tough times endured by the resources sector.

“It’s been a pretty rough five years, or more, for investors and the mining community,” Harrington told delegates.

But he was emphatic in declaring the industry, particularly the junior end of town, was getting back on its collective – steel-capped feet.

“About a year and a half ago we saw a meaningful rebound in the coal space and then foreign exchange,” he continued.

“A whole series of other sequences have kicked back in that has brought us out of being a dire straits sector to being the sector to be getting a lot of positive attention, and rightly so.”

Harrington said that when investors look to put their money to work they are clearly looking for the most favourable resource destination, which made investing in the Australian resources sector a smart thing to consider.

“The Australian advantage is our very favourable foreign exchange position,” he explained.

The Australian dollar – in US Dollar terms – has been hovering around the 75 cents to 80 cents mark over the past 12 months.

In 2010 when we cracked US$300 per tonne for our coal we were at dollar parity, so US$300 was basically AUD$300 

When the coal price recently hit that US$300 spike again, the Australian dollar was at 75 cents, basically generating revenues of over $400 per tonne.

“We have a natural hedge – call it a benefit – for our producers here that sees us stand in front of some of our competitors that are equal in jurisdiction and opportunity,” Harrington said.

So, with this increased sentiment for the industry, what does Harrington say are the commodities that investors are chasing?

“Go back a year ago, and it was all about lithium, cobalt, and gold was hot to trot about a year ago,” he said.

“These days we are receiving a lot more zinc enquiries, copper is hot and bauxite is very much in favour.”

The renewed interest in the junior resources sector, for both the traditional and newly favoured commodities, is hardly surprising given its long-term relationship with the Australian investment community.

As with all such relationships, there has been plenty of ups and downs, however the recent second – perhaps third – honeymoon phase most probably has plenty to do with the fact that Australian investors understand the junior resources sector.

According to Lanstead Fund director Andrew Sparke there are currently some 730 resources companies listed on the Australian Securities Exchange.

Metals and mining companies have the biggest representation on the board taking up some 30 per cent of the space.

“It’s good to see the sentiment is turning and I think we are certainly heading into a better resource cycle which is great to see,” Sparke said when taking his turn at the podium.

“I think we will start to see some more longer-term money start to come to this sector, once the current cycle starts to mature even further.”