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Coronavirus spike for exploration

f all the imagined scenarios sent Western Areas’ share price up 18% in a single day.
Ocreated by the rise of coronavi- It is hard to recall a drilling campaign having a similar effect on
rus, the resurgence of the junior min- any miner in the past 10 years.
ing sector was firmly in the “unlikely” After years of crying about being undervalued and ignored, ex-
category. ploration companies are suddenly fielding interest in their efforts,
Investors are supposed to be risk and the financial implications could have a snowballing effect.
averse in times of global uncertainty, Exploration has made major advances on technology and strat-
choosing safe havens to park their egy in the last decade, but the problem was that juniors were
money instead of punting on specu- unable to make the most of these advances because they were
lative asset classes. That would logi- lacking market support. They were either too poor to use the new
cally mean they would turn away from junior resources technologies or not sufficiently trusted by the market to apply their
stocks which, as speculative investments go, have a reputation for strategies to untested greenfields ground.
being as reliable as picking a Melbourne Cup winner from the year- Now that such support is there via capital raisings and ascending
ling sales. share prices, they can afford to apply the expertise, innovation and
However, during the first half of 2020, the opposite was true. knowledge which has built up in the Australian exploration sector.
Junior explorers are enjoying a period of upward mobility not seen This will inevitably lead to new discoveries, most likely in terrains
since those heady days of stimulus-fuelled commodity super-cy- which have not previously been thought of as mineral provinces.
cles immediately after the GFC. So, instead of being a short-lived bubble, the current explora-
Sure, in such an uncertain time you would expect the gold min- tion boom could be the beginning of a new era of discovery for the
ers (junior or not) to receive attention given the spot price has hit sector. There will still be plenty losers along the way and we may
$US1,800/oz and is seemingly set to break the $US2,000/oz mar- encounter some froth and bubble eventually but it also represents
ket sometime this year. the best opportunity many companies will have in their lifetime to
The market buzz, however, has not been confined to precious make a genuine discovery and impact on the Australian resources
metals miners. The last three months have seen explorers in gold, scene.
copper, nickel and zinc catch fire in the market as investors fall in
love again with exploration stories.
We have seen enthusiasm for greenfields plays and a willing-
ness to back exploration in difficult terrains. Industry must
All the while, instead of greeting good results with the same
shrug they’ve been giving for the last decade, investors are diving remain vigilant
into exploration stocks.
And it’s not even confined to the juniors. Look at Western Areas
Ltd. An established nickel producer with a strong track record of op- For all the success the industry has had in managing its way
erational performance and financial security (it has paid dividends through the first six months of the COVID pandemic, most man-
in six of the last eight years), its share price had barely moved in agement teams will be looking anxiously at developments in Aus-
the $2.05-2.19 range between March and June. Then on June 23, tralia and elsewhere in the world.
it announced the first diamond hole into the Sahara prospect at its Australia’s miners have been largely insulated from the worst of
Western Gawler project in South Australia had intercepted 200m the lockdown thanks to government decisions which saw mining
of nickel and copper-bearing sulphides. The details were only vis- deemed “essential” activity therefore granting mineworkers immu-
ual assessment and no assay results were reported but the news nity from hard border restrictions and quarantining.
However, with Western Australia now adding FIFO workers to
the list of Victorians unable to enter the State, the lockdown is
“ 3,215 workers at Codelco’s copper mines have tested positive,
creeping ever closer to the mine gate.
Internationally the situation is already complicated. In Chile,
The details were only visual
with nine of those dying.
assessment and no assay
While the state-owned miner is yet to suspend any operations,
the Government has forewarned it will close mines if required.
results were reported but the
In Brazil, the spread of the disease is so extensive it would ap-
news sent Western Areas’ share
those of other major miners in the country.
price up 18% in a single day. It is pear impossible to stop it invading Vale SA’s vast operations or
I have spoken widely with miners and contractors in the past few
hard to recall a drilling campaign months about how their protocols are ensuring the virus remains at
having a similar effect on any bay but the true test will come if we see a breakout in an Australian
mine site, accommodation camp or port facility.
miner in the past 10 years.

dominic@paydirt.com.au @DominicPiper

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