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Gold Shines But Lithium Stocks Run Out Of Energy

Lithium stocks took a tumble this week, gold marched higher, and everybody’s email inbox was bulging with quarterly reports, some bearing glad tidings and others triggering a sharp sell-off by investors who expected better.

The correction in lithium, perhaps overdue after a hectic rush up since the start of 2016, saw a number of once-hot stocks fall by 10% and more.

Lithium Australia led the way down, shedding 8c (25%) in the week to 24c, a price which is 38% below its all-time peak of 38c reached as recently as nine days ago. Neometals lost 11c to 35.5c, Altura dropped by 9c to 17.5c, and Pilbara Minerals was 8c weaker at 56.5c.

On the flipside of the bad news, there was plenty for gold investors to smile about thanks entirely to the fall in value of the Australian dollar, and there was even reason for old-timers to applaud the return of more golden-oldies, company directors who have made a return after few years at the yacht club.

Bob Besley, the man behind the old CBH Resources, and Ian Plimer, one of Australia’s more prominent geologists, rode Silver City Minerals to a six-month high of 2.9c as interest grew in its zinc and silver exploration projects near Broken Hill, and Norm Seckold is back with a Mexican silver hunter, Santana Minerals, which has roared up from 1c to 4c over the past three months thanks to silver’s sharply higher price.

Top of the gold news was a fresh forecast from Denmark’s Saxo Bank which has turned into a gold bull with a tip that the metal will hit $US1500 an ounce in the next six-to-18 months thanks to investors shifting funds out of zero percent bank deposits.

Fund raisings petered out after the rush of the past two months though Dakota Minerals is getting ready to raise extra cash after releasing excellent lithium assays from its claims in the Pilgangoora area of WA’s Pilbara, including 35 metres at 2.1% lithium oxide.

Dakota went into a trading halt before the assays were released and then asked for a suspension in trading pending an announcement on a fund raising.

The timing of Dakota’s process of halting trade, releasing assays, and then raising cash has also served to raise the eyebrows of existing shareholders who believe they should have had a chance to trade before new shareholders join via the fund raising.

Getting the timing right in a capital raising is always tricky but there is no doubt that existing shareholders should have rights that transcend outside interests and newcomers to the share register.

Overall, the Australian market lost ground last week with the all ordinaries slipping by 1.1%. The metals and mining index lost 3%, largely driven by falls from BHP Billiton and Rio Tinto. Only the gold index rose, adding 4% thanks to the gold price in Australian dollars adding the best part of $A40/oz as the dollar dropped by US2c to US75.8c

Other events from an interesting week the market included:

  • Independence Group being hammered by investors disappointed in the company’s March quarter report and a decision to sell its stake in emerging gold producer, Gold Road. Independence closed yesterday at $2.95, down 36c or 10.7%.
  • Gold Road was in the news for another reason, raising $74 million for the next stage of work at its Gruyere project, with its shares in a trading halt.
  • Quarterly reports from Northern Star, Troy Resources and Ramelius Resources failed to impress with all three losing a few cents yesterday in a reflection of the fragile state of investor sentiment, with sell becoming the default option unless something special is announced.
  • Havilah Resources did better as the market warmed to its production start-up at the Portia gold project in NSW, with the stock hitting a 12-month high of 50c yesterday before closing at 49c.
  • Magnis Resources put graphite back in the news with a report of excellent results from lithium-ion batteries using graphite from its Nachu project in Tanzania. The stock touched a 12-month high of 62c before easing to close at 58.5c.
  • Cleveland Mining made an overdue return to the news pages with encouraging results from its Lavra gold prospect in Brazil. On the market, the stock lost a little ground yesterday but at 6.8c is close to the 12-month high of 8c reached on Tuesday.
  • St George Mining raced to a fresh high of 19c before closing at 18c after reporting high-grade nickel-copper sulphides at its Mt Alexander in WA.
  • Redstone Resources emerged from obscurity to reach a 12-month high of 2c after reporting encouraging copper assays from its Tollu project in the Musgrave Ranges of WA including 31 metres at 1.18% copper with a 6m core assaying 2.98% copper.
  • Adelaide Resources continued its revival after several years on the sideline, but this time with a lithium project rather than its old preference for copper. Adelaide has its foot on two South Australian salt lakes. On the market, the stock added half-a-cent during the week to close at 1.6c.

Digesting March quarterly reports will be the major job for investors and analysts over the next few days.

If past quarterly sessions are a guide, the best will be filed by the close of business today, with companies having less to say, or those keen to avoid publicity, slipping their report in after 5pm -- and hoping no-one notices.

Resources Rising Stars is a nation-wide series of investor briefings presented by some of Australia’s most exciting resources companies. Our flagship Gold Coast Conference is changing dates in 2016 The conference will be held on Tuesday 24 and Wednesday 25 May 2016 and will once again be held at the scenic RACV Royal Pines Resort on the Gold Coast. Click here to register your interest in attending.

View More Articles By Barry Fitzgerald

One of Australia's leading business journalists, Barry FitzGerald, has joined the Resources Rising Stars' Ten Bagger team. FitzGerald, who is a specialist resources reporter with 40 years' experience, will publish his highly regarded weekly column in Ten Bagger.

FitzGerald - whose column highlights the issues, opportunities and challenges for small and mid-cap resources stocks - most recently penned his column for The Australian newspaper and before that, The Age. His column will give readers the chance to benefit from FitzGerald's extensive contact base, invaluable insights and vast experience of the junior and mid-tier resource sector.



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