Press Release

Tony Grant-Taylor, Queensland Ink 01sep03 THERE'S is a spring in the step of the denizens of Eagle Street and Perth's St Georges Terrace who make their living betting their own and other people's money that there's gold in them thar hills, an optimism that hasn't been seen for years. For almost the first time since before the technology boom of the late 1990s, small mineral explorers and the brokers who service them are getting unsolicited calls from investors keen for a bit of action. Risk and the hope of high rewards are finally coming back into fashion. With a bevy of smaller companies also riding Queensland's coal seam methane and natural gas exploration resurgence, prospects for the junior resources sector have not been as good in ages. According to one gold analyst, his breed had over the past decade become like the life insurance salesman of yore. On declaring what he did at social gatherings, the throng would quickly disperse, assuming he was going to try to sell them some stock whose share price was about to sink like a stone. "Now they'll ask your opinion, even ask what to buy and what floats are in the wings." For the mineral explorers the gold price is, of course, the major factor. Back in 1999, gold's price slumped into the $US250 range. It was still there two years ago. But last week the price crashed through the $US370 level, last seen in late 1996, apart from a brief spike to $US380 in reaction to the sabre rattling over Iraq earlier this year. There are gold bugs who now see the possibility of the price going to $US400 to $US420 by year's end. That should not be necessary to sustain the renewed interest in the sector, however. A price about above $US350 provides plenty of incentive to explore. Of 10 companies expected to list on the ASX in the next two months, six are small mineral explorers. Two others, collier New Hope and Oilex, are in the energy sector. Of the 17 companies that came to market in July and August, six were also explorers. Three were trading on Friday at a premium to their debut close. One of the six was local explorer Nick Mather's D'Aguilar Resources, brought to market with the help of Michael Darling and Harry Adams' Gympie Gold that took a 25 per cent stake. D'Aguilar, though it is now below its 20¢ issue price, did give the stags a turn in the first couple of days. And it raised $4 million, something that would have been nigh to impossible a year ago. The resurgence of hope among explorers is typified by local explorer Diatreme Resources (DRL), whose prospectus for a $2.5 million capital raising becomes available this week after some false starts. Diatreme has 15 tenements covering five gold projects and a zinc-copper target in Queensland, and a diamond prospect near Inverell in NSW – where it will test a different theory on the source of the areas gems to another local explorer, Rimfire, which is also chasing diamonds and platinum in the area. Diatreme's float is somewhat unusual, with chairman and chief executive Tony Fawdon having decided to list on the Newcastle Stock Exchange, rather than the ASX. There Diatreme will join a very select band of only eight other companies. Fawdon chose Newcastle because it allows 10¢ shares, as opposed to the ASX where the minimum price is 20¢ and companies need only have 50 shareholders with marketable parcels. Perhaps as importantly, Fawdon reckons the NSX has the potential to become Australia's equivalent of the London Alternative Investment Market where, he says, companies tend to trade at a significant premium to smaller group's on London's main stock exchange board. While NSX is still only tiny, rumour suggests a major corporate and a merchant banker with a fearsome reputation, are interested in pumping in capital. Fawdon believes junior miners tend to get lost on the ASX. So, if his experiment works and the NSX listing does provide Diatreme with a premium, it could well give the exchange a new lease of life and local juniors a useful new capital raising avenue. Funding junior explorers is of more than academic interest. Exploration spending in Australia has slumped in recent years, from $1.15 billion in 1996-97 to $640.8 million in 2001-02. The growth of service industries in the past 20 years has made the mining industry less important in relative terms to the Australian economy than it once was. But in 2001-02, mining and mineral processing (excluding petroleum) accounted for 9 per cent of gross domestic product, 4.3 per cent of total employment and, importantly, 24.7 per cent of new capital expenditure. The minerals and metals sector produced $43.7 million in export income, 29 per cent of Australia's total, and $4.3 billion in total tax payments. The mining industry's Strategic Leaders Group, in a report to the Federal Government, has pointed out: "Junior companies are critical to the continued development of the Australian minerals industry, as these junior companies (which historically account for 80 per cent of miners listed on the Australian Stock Exchange) accounted for over 50 per cent of significant discoveries of gold and base metals in Australia in the period 1970-97."