|It’s possible the lack of reaction is because expectations are so high, but I think it is more because investors are savvy. In this situation, for example, Alacer’s higher production was largely from residual leaching rather than higher grades or throughputs (which is less impressive) and a deferred tax benefit combined with a forex loss actually rendered adjusted net earnings per share below expectations. It seems attuned investors saw through the headlines to the real story, which is just fine – nothing impressive or terrible going on – and held ASR steady.
Attuned investors are certainly a key characteristic of today’s metal markets. As I’ve said many times, for the sector to make a big move up we need generalist investors to rotate in. That has barely happened as yet, which means the investors who are playing are seasoned mining types. They don’t often get caught by headlines; they know to look at maps and cross sections before reacting to a drill result; they can see when a financing is coming. Sure, last year we saw some weak stories get what I would call undue attention, but in general today’s mining investors are a smart lot.
That is visible in the other thing that’s been happening in the sector of late: financings.
I talked in mid-March about how the sector is divided into Haves and Have Nots. Stocks in the first category have momentum: they can raise money, complete work programs, market their stories, and generally get things done. They got into this category through some combination of discovery, strategic interest, novelty and undervaluation, strong shareholders, and luck.
Some see share price gains; others see prices generally staying sideways. But in a market where investors remain limited and are smart enough to follow only the best stories, these stocks that have momentum are attracting all the attention and are having a reasonably good time.
Things are different for the Have Nots. These stocks – everyone else – are struggling to raise money, which means they can’t do anything else. In a vicious cycle, their lack of progress feeds a lack of momentum, reinforcing investors’ inclination to stick with the Have stocks.
So of course when I say that financings are happening, I mean they’re happening for the Haves. A few good examples from the last week: Pure Gold Mining (TSXV: PGM) announced a $17.4-million financing that it almost immediately increased to $20.9 million and SilverCrest Metals (TSXV: SIL) announced a $15-million bought deal raise that I understand is already full. Those are significant sums of money! So the fact that both financings filled up rapido shows there is capital available…for the Haves.