With 629 mining companies listed on the ASX, there is certainly no shortage of potential opportunities for investors looking for exposure to a range of commodities. However, of this total only 15% of miners are actually at production stage, which means there are a lot of loss-making miners out there.
In fact if you were to combine these 629 companies, their total market capitalisation would come to around $378 billion, however the top 10 would account for 92%, or $348 billion, of this amount.
So outside the top 15% things certainly get tricky for investors, however for those investors prepared to take a higher level of risk and spend the time following the sector there is the potential to uncover some great opportunities. Here are three small miners at different stages of their development that all have great potential and could be worth further research.
Sundance Resources (ASX: SDL) has a market capitalisation of nearly $230 million. The firm is focussed on developing an iron ore project that spans the Republic of Cameroon and the Republic of Congo in Central Africa. The combined Sundance reserves are huge and the scale of the operation planned rivals those of the Pilbara.
Indeed the task ahead for Sundance can be likened to that of Fortescue Metals Group (ASX: FMG). Milestones include the building of a 510 km railroad on which to carry the iron ore to port. With capital expenditure plans of around $4.7 billion — over $2 billion for the railway alone — there is a huge task ahead for Sundance but as Fortescue has proven to the doubters, China’s demand for iron ore has made some seemingly impossible plans possible.
Cazaly Resources (ASX: CAZ) is advancing a number of projects in iron ore, copper and gold. However the most promising near-term project would appear to be the Parker Range Iron Ore Project in Western Australia. If a market capitalisation of just $10 million and a reported resource of 35 million tonnes of iron ore at Parker Range aren’t enough to get some investors excited, the fact that there is significant established infrastructure to support the project could. It appears the major hurdle at present is getting a final decision from the state government on expanding the Port of Esperance, where Cazaly loads and ships its iron ore.
Dart Mining (ASX: DTM) offers investors exposure to gold, molybdenum and copper. The $15 million company is hoping to develop its Unicorn Project in regional Victoria and be producing ore by early 2017. While it is still early days, the mine life of the project is potentially quite long and with a quick payback. Being based in Victoria means the company has easy access to a workforce, infrastructure, utilities and all other requirements which makes this project one for investors to keep an eye on as well.
Given the high failure rate of explorers who never manage to get their project up and running, being very selective and diversifying is key for investors in the small resources sector. Finding smaller miners who are at a later stage of their development and with a high likelihood of entering production can be an optimal time to invest.
Prefer to buy sound dividend-paying companies rather than speculative mining stocks? Discover The Motley Fool’s favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of “The Motley Fool’s Top Dividend Stock for 2013-2014.”
Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.