By Barry FitzGerald
Equity fund adviser says companies should make the most of the boom while they can.
THERE could well be a bit of a celebration today in the share prices of the iron ore producers and developers on the basis that should Tony Abbott's Coalition end up in power, there will be no mining tax.
And if a chastened Gillard government holds on, it's likely to back-pedal on the proposed tax slug like there is no tomorrow.
But Garimpeiro won't be getting too excited about it all. The key factor that will determine the near and longer term market valuations of the iron ore producers and developers remains the iron ore price, now nice and transparent thanks to the good work of Farmer Kloppers at BHP Billiton.
The iron ore price has come back from the $US186 a tonne level it commanded in April to $US146 a tonne. Despite the fall, it is still a fantastic price, giving our big iron producers margins of more than $US110 a tonne and lots of hope to the would-be iron ore producers that happy days are ahead for them, once they jump the infrastructure hurdles and get into production that is.
But will it last? Former Melbourne stockbroking resources guru turned private equity fund adviser/owner, Peter Woodford, does not think it will, just like he reckons Santa Claus does not exist either.
''My advice to the iron ore companies is to produce all the iron ore they can, as quickly as they can and get it out of Australia as quickly as they can. Why? Because this ain't going to go on,'' Woodford told Garimpeiro.
Woodford said there was no doubt that the Chinese economy would get bigger and bigger, just like that of Japan in the 1960s and 1970s.
''But with the huge increase in global iron supplies on its way, we've got a reckoning coming,'' Woodford said.
''The Chinese are out madly all over the world getting as much iron ore into production as they possibly can to kill the market. Now it's not going to wipe out the local industry by any means. But there is going to be some big corrections along the way,'' he said.
After 35 years in the resources game, Woodford's note of caution about the iron ore stocks is worth taking on board. It is certainly been taken on board at the Telluride Fund, a private resources equity fund that Woodford jointly owns with the South African-owned RMB Resources.
The fund has been putting our local fund managers to shame, posting a 70 per cent return last year and averaging something like 66 per cent over the past eight years. If there is a current bias in the fund, it is towards gold stocks.
''There are so many new iron ore producers, and so many iron ore explorers making so many new discoveries. You don't get that in gold,'' Woodford points out. Very true it is too.
THE bush telegraph was busy last week, telling Garimpeiro he should have a look at a copper/gold/molybdenum exploration project at Temora in NSW, owned by Toronto-listed Goldminco Corporation (TSXV: GCP).
The suggestion was that Temora might soon be better known for the work of Goldminco than it is as the birthplace of legendary harness racing pacer Paleface Adios. Garimpeiro is not sure about that but is happy for the advice anyway.
Toronto is a long way from Temora, but Goldminco is in fact based in west Perth. It is also about 66 per cent owned by Milan Jercovic's ASX-listed Straits Resources (ASX: SRL).
Most recent news from Goldminco was that its Culingerai porphyry copper prospect had been returning some decent hits, including 57 metres at 0.5 per cent copper, 0.46 grams of gold a tonne and 43 grams a tonne molybdenum from 120 metres depth.
The result was said to complement other drill hole results, making Goldminco ''extremely encouraged.'' The company already has a resource in the region that stands at 21.1 million tonnes grading 0.35 per cent copper and 0.5 grams/tonne gold.
Still, it is going to take more than that to knock the ''Temora Tornado,'' as Paleface Adios was called back in the 1980s, from his position as the biggest thing in town.
IT HAS not been a good year for mining and exploration floats, unless you like the idea of being able to buy the shares after their debut on the ASX at a discount to the issue price. The discount on debut has been all too common. But some have managed to hang in there, particularly those that have not messed around and got on with doing what they said they would be doing with the funds raised. May float Hot Chili (ASX: HCH) is a case in point. Its shares last traded at 19.5¢, down from the 20¢ issue price all right, but at least it is within spitting distance of the starting point for the new investors back in May.
Hot Chili has just kicked-off its maiden drilling program at its advanced uranium/copper/gold Productora and Los Mantos (copper) projects in Chile. It is a good-sized drilling program and the flow of results (Productora is up first) could be worth watching given the both properties have known mineralisation.
NICE to see that Bendigo Mining's calculated punt that the Henty gold mine in Tasmania has more gold to give up looks as if it is going to pay dividends.
The discovery of a new zone of high grade gold mineralisation close to existing mine development suggests that Henty, acquired by Bendigo for a knockdown price in July 2009 with very few reserves under its belt, is going to be around for some years yet.
The ore pods at Henty have historically ranged from 50,000 ounces to 250,000 ounces in size, at an average grade of about 12 grams of gold a tonne.
Even at 50,000 ounces, we're talking about a potentially big value shift for the company, given gold is as strong as ever at $A1373 an ounce.