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Small Resources Sector Maintains Momentum

The junior resource sector has generated consistent gains throughout much of the last 12-month period -  driven by improved demand-supply fundamentals, stronger commodity prices, Chinese economic stimulatory measures and Trump-induced infrastructure building expectations. The S&P/ASX Small Ordinaries Resources chart below shows that the Index has overwhelmingly been in positive territory for the majority of the past 12 months.

Despite investor nervousness related to the heavyweight miners like BHP Billiton, Rio Tinto and Fortescue Metals that are heavily correlated with falling iron ore prices, the junior sector is in far better health. By contrast, commodities that junior companies are closely correlated to have risen strongly over the last 12 months. These include gold (up 4%), silver (up 12%), nickel (up 5%), tungsten (up 5%), manganese (up 17%), copper (up 19%), lead (up 19%), tin (up 23%), aluminium (up 23%), zinc (up 26%), vanadium (up 31%) and cobalt (up 130%).

This positive sentiment is also being reflected in increased company activity - primarily heightened exploration activity and exploration expenditure. Industry group AUSTEX recently published data advising that expected exploration expenditure by the junior sector for Q2 2017 would be 40% above the levels during Q2 2016. AUSTEX estimates that overall exploration expenditure will be around $400m, compared to $285m during the same period a year earlier. AUSTEX also estimates that total junior company announcements for Q2 2017 will be in the order of 2,160 - up strongly from 1,762 in Q4 2016 - and another strong indicator that the sector is growing.

Quality junior companies are once again able to raise funding for exploration, appraisal and development activities, markets are reacting positively to favourable company news, with the potential for share price appreciation.

S&P Australian ASX

Small Resources Index


Source: Investing.com, 9 June 2017


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20-Year Gold Price

Performance (AUD/oz)


Source: goldprice.org


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Some of Our
Strong Performers

Oklo Resources (ASX:OKU)
**Up 325% since initial coverage in Nov 2015

West African Resources
(ASX: WAF) **Up 362% since initial coverage in Sept 2015

Gascoyne Resources (ASX: GCY)

**Up 132% since initial coverage in

Feb 2016

(**Gains as at 3 August 2017)


GAVIN WENDT
Founding Director &
Senior Resource Analyst


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