A flattening of Ernst & Young’s Mining Eye Index, which tracks LSE AIM listed junior miners and explorers, after several quarters of decline, could be a sign sentiment is improving.
LONDON (MINEWEB) – After a number of successive quarters of decline in Ernst & Young’s Mining Eye index (which tracks the London Stock Market’s AIM-listed junior miners), the latest quarter is flat to positive leading E&Y’s Global Mining Transactions Leader, Lee Downham to see light at the end of the tunnel for the sector.
Downham notes, on the issuing of the latest edition of Mining Eye, “Another subdued performance by the Mining Eye reflects ongoing funding challenges for AIM’s junior miners. However, as we look to the final quarter of an extremely challenging year, there are reasons to take the optimistic view that sentiment is turning. A relatively flat performance by the Mining Eye represents a welcome improvement from the last four quarters of consecutive declines.”
Indeed, deeper analysis of the figures shows that the quarter actually showed a 6% upturn in the index, largely helped by a significant capital raising success for African Minerals for its big Tonkolili iron ore project in Sierra Leone, and Archipelago Resources, which saw a £338 million cash offer for the company from its major Indonesian shareholder.
However, these are the two biggest constituents of the Index so their successes has perhaps had a more significant impact than the 6% overall index rise might suggest. But, even so, the fact that the index was flat prior to the late boost from these two companies could be taken as a sign that perhaps sentiment towards the mining juniors is changing at last.
The Ernst & Young Index result is, not surprisingly, mirrored by the FTSE AIM Basic Resources index which is no longer the worst performer of the market’s sector indices. Indeed E&Y comments that some AIM stocks saw ‘astonishing price rises’. Notable amongst these was Rare Earth Minerals which at one time rose by over 2,000% during the quarter – but when the share price rise starts from around 0.04 pence a share it doesn’t take much of a jump to record this kind of percentage increase – probably the main attraction of the really low priced juniors. Currently the stock sits at 0.769 pence.
However there were several other AIM junior miners which recorded plus 100% price increases over the quarter – while, of course there were several others which saw fairly high double digit percentage downturns. Investing in junior miners is always a risky business even when markets are good!
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