Last week’s Strictly Boardroom made some initial observations on what separates the best from the rest among emerging resources companies listed on the ASX. Exploration success stood out as a key growth driver – with the value that comes from mineral discovery catapulting a number of companies towards the top of the pile.

Indeed, the majority of the “Top 20” performers (by five-year shareholder return) from a study of a “Top 80” emerging minerals companies had exploration success to thank for their market achievements.

Now Strictly Boardroom is looking a little closer at some other attributes of those same emerging resources companies, to build a form of corporate profile of what, how and where our next-generation minerals sector corporate success is coming from.

Data from the 80 emerging companies was assessed, with each company having grown beyond a minimum $A110 million market value threshold.

Put simply, the aim was to reveal the DNA of our next-generation successful mining companies? For example:

- What are they investing in?

- Where are they investing?

- What financing method is preferred?

- Is more than one strategy at play? (Just exploration – or far more than that?)

First to the commodity markets of choice: Here, it appears that size matters, of commodity market, that is. The larger global mineral markets of gold (31%), iron ore (16%), copper (14%) and coal (11%) are the most strongly represented across the 80-strong list of companies. Together those markets comprise over 70% of the focus. There are plenty of smaller markets represented too – including tin, uranium, lithium, nickel, mineral sands, platinum, manganese, graphite, rare earths and zinc. The results among the Top 20 companies (by five-year shareholder return) are not too different from the full dataset – with gold (40%), iron ore (20%), copper (10% and coal (10%) here comprising 80% of the corporate focus in total.

Next, to the geographic focus for resources investment: Australia is the clear winner across the full 80-strong ASX company dataset – with 50% having their principal assets close to home. Africa comes second – at 22% - with Southeast Asia (10%) and South America (8%) next in line. ASX emerging resources companies have a global focus - with representation for North America (Canada), Central America, Europe and Greenland. The results among the best-performing 20 companies by shareholder return are interesting, showing that success can be achieved globally from an Australian base. For the record, the stats here came out at Australia (40%), Africa (20%), South America (20%), Southeast Asia (10%) and Canada (10%).

On principal financing method, equity is not surprisingly the dominant mode for emerging companies, but debt appears to punch above its weight among the better-performing 20 companies. For the full 80-strong company dataset, the ‘financing split’ sat around the 80:20 mark equity (80%) debt (20%) – whereas 60:40 looks closer to the mark for the better performers. This debt-equity observation is likely a case of correlation not causation. That is, the financing contrast observed likely simply reflects that the more competitive projects within the dataset were able to attract suitable debt-financing terms that were executed by the project owners.

Finally to strategy – and to whether our emerging ASX resources companies have, as yet, moved beyond a single strategy horizon. In non-management-speak, that asks the question “are they just one-trick ponies”? The 80-strong dataset represents a moving target as each company continually evolves of course and most remain a work in progress. Suffice to say, that those companies having more than one string to their strategy bow are starting to look good – with those companies (still in the minority) with more than one clear strategic growth horizon all ranking within the top half of the dataset, either by market capitalisation or shareholder return.

That in part answers the what, where and how of the key factors at play driving the next generation of successful ASX-listed mining companies. What remains to be answered is the why. That is, what distinctive capabilities make the better-performing emerging companies different from the others?

Hopefully there is an answer coming to that question, too!

Good hunting.

Allan Trench is a Professor of Mineral Economics at Curtin Graduate School of Business and Professor (Value & Risk) at the Centre for Exploration Targeting, University of Western Australia. He is a non-executive director of several resource sector companies and the Perth representative for CRU Strategies, a division of independent metals & mining advisory CRU group (allan.trench@crugroup.com).

Graham Arvidson works for an emerging resource company in a leadership capacity – having previously worked on mineral projects around the world including Canada, West Africa, China, and Australia. He has recently undertaken combined MBA and MSc (Mineral Economics) degrees at Curtin University, which included his research on success strategies for emerging mineral sector companies. Arvidson is a chartered engineer and member of AusIMM (graham.arvidson@gmail.com).