Rising manganese stars signal the worst is over Robin Bromby.
IT wasn't a great half year for BHP Billiton (BHP) in terms of its manganese performance. Compared with the second half of 2008, revenues for that metal in the six months to December 2009 were down 54 per cent while underlying earnings before interest and tax slumped 85 per cent.
Manganese, the ingredient vital to steelmaking and for which there is no substitute, has been a serious casualty of the downturn in steel demand and so has not had much investor interest. Spot prices paid by Chinese importers fell by about two-thirds in the 12 months from July 2008.
However, there is clearly a growing confidence that the worst is over. The price graph line has been heading upwards for the past six months.
And is it just coincidence that three of the more likely manganese stars of the future all chose last week to launch investor presentations about themselves? Manganese, incidentally, is the fourth most used metal after iron, aluminium and copper.
BHP is, of course, the big banana in Australian manganese with its 60 per cent owned Groote Eylandt mine in the Northern Territory, followed by the now delisted Consolidated Minerals at Woodie Woodie in Western Australia and the other producer, OM Holdings (OMH), also in the NT. All three are within the top 20 Australian mines by value.
But it is the manganese explorers, rather than producers, that may soon be attracting the attention of the punters. For a company whose shares still trade at just 20c, Shaw River Resources (SRR) has a lofty ambition: to become the world's leading manganese producer and explorer. With $5 million in the bank and no debt, SRR has six manganese projects active, most in the Pilbara and one in Ghana.
Another presentation came out of Aurora Minerals (ARM), which has the Capricorn Southeast deposit, inland from Carnarvon. There's been mounting interest in this stock. Last month Fat Prophets recommended a buy at $1.05; but the stock is now at $1.25 after climbing 17 per cent over the past two trading days.
This advice is obviously worth considering in view of Fat Prophets having last September tipped it at 44c.
In its latest note, Fat Prophets says Aurora seems intent on adding shareholder value as quickly as possible but adds: "It might not have much time to do this before the inevitable hostile takeover."
But Gavin Wendt at Mine Life inserts a word of caution. Aurora, he says, may well have a large project but this project is yet to be properly tested by drilling. As regular readers will know, Pure Speculation is very keen on drilling before losing its head over a project.
The other stock presenting, and which also saw a good price hike last week, was Western Uranium (WTN) , which went nowhere looking for yellowcake and is now reinventing and renaming itself as manganese explorer Groote Resources. It has taken up ground (and underwater areas) near what it calls "BHP's well-kept secret" at Groote Eylandt.
No one can quite figure out why this ground was there for the picking. And WTN has just appointed the man who managed BHP's manganese exploration, Barrie Bolton, as geological adviser for many years. Ten of those years were spent at BHP's mine next door to WTN.
WTN Price at posting:
72.0¢ Sentiment: LT Buy Disclosure: Held
