Aquila Resources and Bullabulling Gold were the two succumbing to offers their management teams reckoned were too low but which investors thought sufficiently generous to accept.
The difference between what management wants and what shareholders are prepared to accept partly explains why so little has been done, yet, to clean up the logjam of small miners that have either run out of money or the drive to develop their assets.
Another interesting observation from the Aquila and Bullabulling deals is that both companies fell to Chinse suitors, a development which says a lot about who’s got the money to buy mineral assets and who believes there will be a second wind behind the resources sector.
We’ll get to the China factor another day but first it’s worth considering the problem of too many small miners choking the Australian Securities Exchange, making it all but impossible for an outsider with an interest in the sector to separate those with a chance of survival from the zombie companies that are already dead but refuse to acknowledge the fact.
Exact figures are hard to come by but when Blower last looked he reckoned there were at least 200 small miners with a market capitalisation (what they’re valued at on the market) of less than $A5 million and about 100 with a market value of less than $3 million.
One of the problems in counting the number of dead miners is identifying real players in the game from those in the process of conversion to a biotech business, or some other technology venture, with mining still in their name – just in case the tech adventure doesn’t work out.
What can be said is that of the 1977 companies with their names on the last official ASX list that Blower saw, 177 had no market capitalisation at all.
In other words, they have no value but remain listed because someone is paying their listing fees and is probably scrambling around looking for a capital injection.
How many of the 177 are miners is uncertain but given the natural structure of the Australian stock market Blower is prepared to bet that about half have mining in their corporate genes.
Once you get among the stocks with some value it is sobering to discover that 59 are said to be worth less than $1 million – which doesn’t buy you a decent house in Sydney or Perth these days.
As your eyes rise up the list there are then another 117 companies with a market value of more than $1 million but less than $2 million, another 102 with a value of more than $2 million but less than $3 million, another 100 with a value of more than $3 million but less than $4 million and 51 with a value of more than $4 million but less than $5 million.
In total, including the zero value stocks, there are 606 companies with their names on the official ASX list valued at less than $5 million, which means that 30% of ASX companies have a value that will not buy you a house in a ritzy suburb, or a small business such as a successful newsagency, or inner-city coffee shop.
Why are they there? That’s the most pertinent question because all that those 606 companies are doing is acting as a blockage in the system, making it hard for everyone to raise fresh capital from a confused investment community.
What can be said of the companies at the bottom of the pile is that management invariably believes the business is worth more than the market says it is worth.
That was clearly the case with the Aquila and Bullabulling takeovers, which management initially resisted, until a majority of shareholders voted with their feet and accepted the bids on offer.
Similar “give me the money” responses from shareholders will follow the example in those two bids as investors demand that management either get on with the job of developing an asset, or sell their company to help clean up the logjam.
