Dusting off Your German
The Frankfurt and lesser German stock exchanges (mainly Berlin and Stuttgart) used to be a by-word for indiscriminate buying of Canadian juniors in the heady days of the pre-2008 boom). While the mining market recovered (somewhat) in 2009-2011) the German market was still in shell-shock from the lambasting it had received in the Crash.
In the heady days the joy of the Canadian crowd (and the Australians to some extent) at being adopted by exchanges that asked nothing more of them that they be listed on another official exchange elsewhere was beyond comprehension. With secondary listings (particularly London) involving jumping though more hoops than they ever needed to with their primary listing (and also costing an arm and a leg), the mining juniors were fascinated that someone could call them up one day and tell them that suddenly they were turning over ten of thousands of shares on the Berlin Stock Exchange when they didn’t even know such a place existed.
Thus the German factor was a major motor of the phenomenon that was the mining equities market pre-2008. When the history (obituary?) was written on that era very few gave credit to the role that the normally staid Germans played in pumping up the volume and prices of the great and good (and less great and definitely not good) stories that made the running in those days. The German investor was the icing on many a mining stories’ cake.
Rising Tide Lifting a Few Boats
It was recently brought to my attention that the German market was at least working for Commerce Resources, the sometime Tantalum/sometime Rare Earth stock. When we went to check, the effect was somewhat eye-popping. They have obviously been doing something right. In the table below can be seen:
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We consulted with a pundit that we know in Europe who deals with matters of mining and he commented: “Frankfurt seems indeed to become more and more buzzing with mining deals, but most of the volume is caused by promo’s. Commerce Res is a good example of a decent company, but most other volumes were caused by promotions. So the question would mainly be if it’s a sustainable trend or just a sign that promotion is picking up. I personally just don’t understand why people buy on secondary markets whilst it’s so easy to buy on the primary market..”. However, in light of my own experience of Canadian brokers being as friendly as gypsy fortune tellers, I can well see why the average Hausfrau in the Strasse should find it easier to pick up stock on their local exchange rather than negotiate their way through the sharp-toothed denizens of Bay Street with their $80 per trade minimum commissions.
A Finance Venue to Pip Vancouver?
If the trend holds then well might we ask could this be a new source of funding to issue shares in Euros instead of the CAD? We do not see why not.. It worked for certain names back in the past. We have met executives who still sigh for the days when their registers frequently had 40% of the holders located on the Continent. At least the nasty things they may have said, post-deal, on the German-language bulletin boards were unintelligible to the average geo/CEO of a TSX-V junior (as well as being a mystery to their brethren tossing brickbats over on Stockhouse).
Many European exchanges, despite the torpid economies, are trading at rather ritzy levels, and it should not be forgotten that the German, Austrian and Swiss economies have largely left the Euro-woes behind. They have been the gainers at Greece, Portugal and Italy’s expense. Thus there is a large pool of money swishing around looking for a “cheaper” place to reside. The Euro has been doing rather well vis-à-vis the CAD or the AUD. First whispers that deals can be done in Europe will see the Business Class of flights from Vancouver to Frankfurt bulging again as near-bust juniors go in search of funds with the old joie de vivre (well really the old “damn the expense, put it on the corporate card” attitudes of yore).
Europe used to be an obligatory stop on the farther travels (travails?) of the average Canadian mining executive in those dimly remembered days pre-2008. Since then only the hardy few bothered to traipse so far and expend so much on an air ticket to turn over the stones in Zurich or Munich to see if there were some stray francs lying around uninvested.
Such was the bad memory that most German investors had of the boom days that they stuck to buying gold coins and eschewed any paper investments like they were Weimar Republic Reichsmarks. And they were not wrong in light of subsequent performance. I went to the Munich Gold Fair in November 2012 and you could not give away shares in a Canadian gold junior, meanwhile the merchants of gold ingots and coins were doing a business like the beer bar at the Yankee Stadium at half-time on a game day.
Maybe the tide has turned. It is interesting that the stock they can’t get enough of is a sometime specialty metal story and NOT a gold story. Is this indicative of a revived interest in non-precious paper? Will this eventually spread to gold and silver stocks or have they burnt their bridges one too many times with investors who got to see neither production nor dividends? Remember the old saw that a gold ingot doesn’t pay you a return is equally true of a gold major with production (at least the Canadian variety).
Christopher Ecclestone is a Principal and mining strategist at Hallgarten & Company in London. Prior to founding Hallgarten & Company in New York in 2003 ... <Read more about Christopher Ecclestone>