An analytical look back over the past 12 months for resources companies in Australia tells you that it has been pretty solid and good for investors. There are plenty of indicators that commodity price rises are not nearing their peak and share price gains have further to go.
This seems to have escaped a large swathe of the financial media in Australia, who still talk about the construction boom being over and the resources sector moving into the slower but steadier production phase.
At a one dimensional level, this is partially true. Most of the big LNG developments like Gorgon are nearing the end of the construction phase and most of the iron ore developments are incremental rather than new standalone projects.
However, one area that seems to have missed the attention of the media is the huge uptick in activity in the exploration sector. Where a year ago drillers were calling companies offering rigs at just above cost to keep them moving, the same drillers now have waiting periods, albeit with less rigs, of many months or more.
At the RIU Explorers Conference this week in Fremantle, it was clear to long time attendees just how much the sector has shifted over the past 12 months. There were some green shoots starting to appear at last years’ event, however the base was low and the mood was cautious.
Step forward a year and the conference was heaving with explorers, major producers, brokers and analysts, generally with smiles on their dials. Presentations were heavy on exploration programs and expected spends over the coming year, a far cry from some of the ‘holding costs’ efforts of the past few years.
As we also saw in Cape Town a few weeks back, investor interest has shifted from polite acknowledgment to competition and jostling for position to get set in a stock. We look forward to the next phase where the Fear of Missing Out (FOMO) kicks in, with ridiculous price gains based on thin volumes.