A Growing Resources Renaissance
2016 has played host to a significant resource sector rejuvenation. Quality smaller companies are once again able to raise funding for exploration, appraisal and development activities, markets are reacting positively to favourable company news, and share prices are now moving in the right direction. The proof of the pudding is in the eating - high-quality smaller companies have significantly outperformed the sector’s heavyweights. Resource behemoths are forced to live with the consequences of poorly-timed project expansions, expensive corporate deals and exposure to the wrong sorts of commodities.
Smaller companies by contrast boast management with significant 'hurt money' invested, meaning they are often run on the smell of an oily rag. Smaller independent resource companies are also much more leveraged to the strongly-performing commodities of 2016. These include gold (up 13%), copper (up 17%), silver (up 18%), nickel (up 27%), cobalt (up 28%), lead (up 34%), crude oil (up 38%), tin (up 42%) and zinc (up 74%) - along with lithium and graphite. 2016 has been an outstanding year for commodities and there's every indication that this positive momentum will continue into 2017. This is reflected in the Australian Small Resources Index graph below.