Three companies – Spencer Resources, Minotaur Exploration and Jupiter Mines – have recently taken unconventional steps to create value for shareholders.
Spencer has chosen to exit the resource sector altogether, just 18 months after listing on the Australian Securities Exchange.
Minotaur has struck a relationship with an unnamed private equity fund, in what amounts to a partial privatisation of its exploration funding.
And Jupiter Mines has decided to delist from the ASX and operate away from the harsh glare of the public market.
The creative responses to sagging share prices coincides with a statement earlier this month by Sprott Global Investments chairman Rick Rule, that most junior resource companies on the ASX are worthless.
He told The Australian that between 60% and 70% of all junior companies were a hangover from the resources boom and “truly valueless”
“One would hope that those (equity) issuers ultimately go to their intrinsic value, which is zero, and open up more space for the best 30% of your issuers, the best of which are truly world class."
Many resource sector CEOs would disagree with Rule and could make a strong argument that investor sentiment towards small caps is so bad that even a quality portfolio of prospects and cash in the bank is not rated by the market.
Spencer Resources is one company in that category.
The Adelaide-based company listed on the ASX in March last year after raising $2.6 million for exploration on the southern edge of Gawler Craton.
The company has a highly prospective group of tenements in an emerging hotspot that includes Investigator Resources’ Paris silver discovery and Terramin’s base metals prospect at Menninnie Dam.
Investors initially provided Spencer with solid support but the 20c shares sank to 4.5c by mid-2013, despite a cash backing of more than twice this value.
On October 28, Spencer chairman David Paterson announced a reverse takeover by Bulletproof Networks, a highly successful information technology and cloud computing provider.
Spencer’s share price immediately jumped to 40c and was still trading this week at more than 35c.
Paterson told MiningNewsPremium the company had looked at a number of new opportunities in the resources sector but none were suitable.
“Our exploration activity was broadly in line with the plans in our prospectus, including a VTEM [versatile time domain electromagnetic] survey at our Mt Double project held jointly with Minotaur.
“But it was very hard to justify spending more money at this stage when the market simply wasn’t recognising the value.
“There was a lot of pressure from shareholders to do something about our share price and going outside the resource sector has been a very effective way of doing that.”
Spencer’s mineral titles, which include four exploration licences at Mt Double and three titles immediately northwest of Port Augusta known as the Pandurra block, are to be divested either through outright sale or joint venture.
Minotaur is a much larger explorer with a reputation as one of the best in the business but the company is also sold down to fire-sale prices.
At September 30, Minotaur held cash and investments in other ASX-listed companies valued at $9 million, compared to a total market cap of only $13 million.
In June, Minotaur announced an alliance with a private equity fund – which kicked off with a placement at 18c a share to raise $750,000 – and the sale of a 50% interest in Minotaur Gold Solutions for $300,000.
The relationship is about to take its next step following last month’s completion of a takeover bid for Breakaway Resources.
A successful takeover cleared the way for the creation of two JVs between Minotaur and the unnamed private fund over Breakway’s tenements near Cloncurry and Kalgoorlie.
The private equity fund will spend up to $9 million over the next four years on JVs operated by Minotaur.
Manganese producer Jupiter Mines has responded to the adverse equity market by deciding to delist from the ASX.
Announcing the plan last month, acting CEO Priyank Thapliyal stated the market had not reflected the company’s recent graduation from explorer to producer, with the share price languishing at between 7c and 8c.
Application to delist has been approved by the ASX, provided shareholders vote in favour of the plan at the annual general meeting on November 28.
Shareholders will have at least one month from that date to sell before Jupiter Mines is removed from the list, although most shareholders are expected to prefer an illiquid, private market than a public market with depressed prices.
If current conditions continue, it could be the first of many exits from the public market by mineral explorers.