The momentum building is building in the financial markets. Cannings Purple’s Investor Insight team explain.
The West Perth sentiment gauge has definitely moved back towards positive since the exploration and mining community got back to work in earnest around February this year, when the coffee shops and bars started to fill up again following the Christmas and New Year lull.
Commodity prices have sputtered back to life and show some signs of at least not falling back, if not heading north on the chart, and the Australian dollar remains in the favourable range for exporters of all commodities.
You can feel the momentum building. The mild reaction from the market to the budget day announcement of a cut in the cash rate by the RBA to a record-low 1.75% coupled with the fact the Treasurer delivered a reasonably benign federal budget that really only caused iritations to those allergic to slogans, could point to more positive times ahead.
What provides greater confidence in this statement is the fact juniors with genuine prospects have been able to get away some substantial capital raisings so far this year, which is always the best litmus test of investor sentiment towards the resources sector.
The spread of raisings so far this year has really helped buoy the sector ahead of the end of financial year reporting season, and has demonstrated there is money out there for a variety of commodities in diverse jurisdictions.
We have seen significant funds raised to pursue commodities including nickel, zinc, bauxite and, of course, lithium projects scattered around the usual places like Australia, Africa, South America and Central Asia, but it is home-grown vanilla gold projects in Western Australia that proved the most popular flavour for raising cash.
Unfortunately, as has always been the case in West Perth towards the bottom of every cycle, there are still those marginal companies out there regularly shaking the tin for amounts less than $1 million just to keep the lights on and to maintain tenement obligations, with no real prospect of completing any substantial exploration work on the ground.
Thankfully, they are getting thinner in their ranks with an increased appetite to do a deal, raise cash and get boots on the ground.