Barry Dawes, Head of Resources, Paradigm Securities - Capital Raising for Small Cap Resources Companies

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Barry Dawes, Head of Resources, Paradigm Securities delivered the presentation at the 2013 Mining NSW Conference.

The 2013 Mining NSW Conference looked at mine exploration and development opportunities in Central NSW and the Northern Tablelands with a spotlight on capital raising outlook and overseas investment.

For more information about the event, please visit: http://www.informa.com.au/miningnsw13

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Barry Dawes, Head of Resources, Paradigm Securities - Capital Raising for Small Cap Resources Companies

  1. 1. www.paradigmsecurities.com.au Barry Dawes B Sc FAusIMM(CP) MSEG Head of Resources Paradigm Securities Capital Raising for Juniors The Paradigm Shift 7th Annual Mining NSW Conference Orange 26-27 June 2013
  2. 2. www.paradigmsecurities.com.au Disclaimer Nothing in this presentation shall be construed as a solicitation to buy or sell any security or product, or to engage in or refrain from engaging in any transaction. In preparing this research, Paradigm did not take into account the investment objectives, financial situation and particular needs of the reader. Before making an investment decision on the basis of this presentation, the reader needs to consider, with or without the assistance of an adviser, whether the advice is appropriate in light of their particular investment needs, objectives and financial circumstances. This presentation is based on information obtained from sources believed to be reliable but Paradigm does not make any representation or warranty that it is accurate, complete or up to date. Paradigm accepts no obligation to correct or update the information or opinions in it. Opinions expressed are subject to change without notice and accurately reflect the views of Paradigm at the time of writing. This presentation has originated from Paradigm (ABN 159 611 060), an Authorised Representative of licensed securities dealer Aureus Capital Pty Ltd (AFS Licence 307 706). Paradigm can gain income through brokerage, capital raising commissions and corporate advisory fees.
  3. 3. www.paradigmsecurities.com.au The Paradigm Shift •Knowledge •Experience •Vision
  4. 4. www.paradigmsecurities.com.au What is different this time? • Global equity markets at all time highs... • Commodity prices fair..... • Resources equities trashed ! How now to respond to the current market- The Paradigm Shift!
  5. 5. www.paradigmsecurities.com.au Consider the impact of Google
  6. 6. www.paradigmsecurities.com.au Sir John Templeton • Bull markets.. –Born in Pessimism.. –Grow on Scepticism.. –Mature on Optimism.. and.. –Die in Euphoria Where are we now?
  7. 7. www.paradigmsecurities.com.au Market Wave Psychology
  8. 8. www.paradigmsecurities.com.au Market Wave Psychology • Wave 1 Disbelief .. – Little interest..false dawn.. value unappreciated • Wave 2 Pessimism • - Told you so...end of the world • Wave 3 Optimism – Increased participation.....climbing wall of worry • Wave 4 Opportunity – Market values known...soft markets say buy the dip • Wave 5 Euphoria – Taxi driver tips and wacky market action...overleverage
  9. 9. www.paradigmsecurities.com.au Market Wave - Commodities We are here
  10. 10. www.paradigmsecurities.com.au Market Wave – All Ords
  11. 11. www.paradigmsecurities.com.au Market Wave - Oil
  12. 12. www.paradigmsecurities.com.au Market Wave – Exxon Mobil
  13. 13. www.paradigmsecurities.com.au Market Wave - Copper
  14. 14. www.paradigmsecurities.com.au Market Wave – Industrial Metals Index
  15. 15. www.paradigmsecurities.com.au Long term commodity prices
  16. 16. www.paradigmsecurities.com.au Market Wave - Commodities We are here
  17. 17. www.paradigmsecurities.com.au Non-OECD surpassing OECD Source: Stockcharts
  18. 18. www.paradigmsecurities.com.au China surpassing USA Source: Stockcharts
  19. 19. www.paradigmsecurities.com.au China surpassing the World! Source: Stockcharts
  20. 20. www.paradigmsecurities.com.au China surpassing USA Steel Source: World Steel Association
  21. 21. www.paradigmsecurities.com.au So what’s gone wrong? • US economy recovery steady • China long term growth strong • Asian regional growth strong • European outlook recovering slowly • Non-OECD resource demand > OECD • Vast liquidity injections provided • Gold demand very robust • Interest rate cycle at bottom So it should be all good
  22. 22. www.paradigmsecurities.com.au ASX Metals and Mining
  23. 23. www.paradigmsecurities.com.au ASX Small Resources
  24. 24. www.paradigmsecurities.com.au ASX Gold Index
  25. 25. www.paradigmsecurities.com.au ASX Capital Raising Source: ASX
  26. 26. www.paradigmsecurities.com.au ASX Capital Raising Source: ASX
  27. 27. www.paradigmsecurities.com.au Daily Action ASX XGD Gold Index XGD 75% below April 2011
  28. 28. www.paradigmsecurities.com.au Daily Action ASX XSR Small Resources Index XSR 70% below April 2011
  29. 29. www.paradigmsecurities.com.au Long Term Relatives XAU vs Gold XAU vs SP 500
  30. 30. www.paradigmsecurities.com.au ASX Metals and Mining Market stats
  31. 31. www.paradigmsecurities.com.au ASX Small Resources
  32. 32. www.paradigmsecurities.com.au What to do about it The Paradigm Shift
  33. 33. www.paradigmsecurities.com.au Sourcing Funds • Why has the market place deserted us? • Distortions of compulsory super funds • A$1400bn in funds with A$75bnpa inflow • APRA funds A$917bn • Self Managed funds A$441bn • How many local fund managers available? • How many local brokers resources savvy? • How to make the Paradigm Shift
  34. 34. www.paradigmsecurities.com.au Australian Deployment of CapitalA$bn
  35. 35. www.paradigmsecurities.com.au Australia’s A$1400bn Superfunds
  36. 36. www.paradigmsecurities.com.au APRA Fund Default Assets (June 2012) Source: Stockcharts
  37. 37. www.paradigmsecurities.com.au The Paradigm Shift • See the importance of direct marketing • Seek a different market place • Understand the power of the internet • Seek out the cash rich SMSFs • Get in front decision makers globally • Marketing and capital raising intertwined • Use of ASX onmarket book build
  38. 38. www.paradigmsecurities.com.au The Paradigm Shift • Plethora of web based productivity tools • Search Engine Optimisation (SEO) • YouTube Video news propagation • Twitter news flow engines • iTunes podcasts • Interactive blogs
  39. 39. www.paradigmsecurities.com.au Social Media Source: Coe Communications
  40. 40. www.paradigmsecurities.com.au The Paradigm Shift • Social media initial embrace from youth • >50s slow to adopt but now growing fast • Resources investors mostly >60s • Youth has no money but >50s does • Realign targets to new demographics • Sidestep gatekeepers at brokers/media • Interact with new and current investors • Spread your unique selling proposition(USP)
  41. 41. www.paradigmsecurities.com.au The Paradigm Shift • Professional investors and brokers -52% read company blogs 30% use Twitter -24% blog input helped 12% Twitter helped • Retail investors and trustees - 66% of SMSF >50 66% of new SMSF<50 - 51% >50s use SM 70% of 30-49s • Listed companies globally adopt SM - 88% Linked-in 63% Twitter 44% Slideshare - 40% Facebook 29% YouTube Source: Coe Communications
  42. 42. www.paradigmsecurities.com.au Evolving Demographics Source: Pew Research Source: Coe Communications
  43. 43. www.paradigmsecurities.com.au 0 20000 40000 60000 80000 100000 120000 140000 160000 180000 200000 Rio Tinto Iron Road $188bn (ASX + LSE) $24m Market cap ($m) Levelling the playing field Sources: ASX, Twitter Source: Coe Communications
  44. 44. www.paradigmsecurities.com.au 0.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0 Rio Tinto Iron Road 0.1 123.0 Followers/$m of market cap Levelling the playing field Sources: ASX, TwitterSource: Coe Communications
  45. 45. www.paradigmsecurities.com.au Conclusions • Be among the first to improve your market rating • You are your internet image • You don’t know your ideal support base at present • Engage your market and make them your shareholders • It will cost money but value will be enhanced • Higher values mean lower cost of equity • Capture and harvest your share of A$1484bn bank cash • Bring in the world • Get aboard The Paradigm Shift ...because... The `Optimism’ leg is underway!
  46. 46. www.paradigmsecurities.com.au Wave Market Psychology
  47. 47. www.paradigmsecurities.com.au A$ vs US$ 1913 - 2013 Source: Thechartstore.com
  48. 48. www.paradigmsecurities.com.au A$ vs US Gold Index (XAU) Month end Source: IRESS data
  49. 49. www.paradigmsecurities.com.au The Paradigm Shift • Barry Dawes • bdawes@paradigmsecurities.com.au • +61 2 9222 9111

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