A Share Buyer's Guide to Investing in the Australian Mining Boom
by Dr Allan Trench
Publisher: Major Street Publishing, 2011
Reviewed by: Julie Garland McLellan*
Every Australian has heard the term 'two speed economy'. It refers to what appears to be a sad fact: If you work in mining you will be doing well and if you work anywhere else you should be deeply worried.
This book shows how everyone who is able to invest can take a share in the mining industry and experience first-hand the trials and exultations of the resources industry. It is written by an eminent (PhD qualified) geophysicist with a 20-year track record in mining and several other successful publications. Unlike many offerings by distinguished doctors this book is written in plain English and with a refreshing lack of jargon.
The book starts with an industry overview and then follows the value chain by discussing the potential benefits and risks to be obtained in each 'link', starting with exploration, continuing through development, mining and finally looking at financial, tax and royalty considerations. Commodity market dynamics are discussed and this section is perhaps one of the more unique contributions the book has to offer investors who are already up to speed with the general minerals industry.
There is a useful section on investing techniques with an analysis of IPOs, established companies and contrarian investing strategies. This is followed by commodity profiles and some selected company profiles that demonstrate the application of the ideas and insights outlined in the earlier chapters.
The Appendices include explanations of the JORC code definitions, country risk profiles, a glossary and conversion factors for the main units likely to be quoted in industry press releases and prospectuses.
Most mining company IPOs state that they are aimed at 'sophisticated investors' and (aside the alarming fact that last time I checked the definition of a sophisticated investor it looked to me as if Paris Hilton would qualify) this book will provide the average investor with the ability to read and understand disclosures in the way that one would expect a sophisticated investor to read and understand them.
Having experienced the discomfort of answering questions at an AGM when it was apparent that the questioner had no idea what 'their' company did or how it did it, I can safely recommend this book to all prospective mining investors and to any rueful current investors who are wondering why their shares are performing the way they do.
The book does not include the colourful stories of prominent mining entrepreneurs and makes no mention of the role of a good board and chairman in ensuring that a company fulfils its potential. It sticks to economic and physical facts. Whilst this makes for a placid reading experience, the utility and applicability of the information give the book a momentum of its own. Above all, this book takes the mystique out of mining and allows normal people to make their own informed investment decisions based upon their own risk profiles. It will definitely allow any reader to have a better discussion with their broker or advisor.
Although the title is specifically Australian the book will be an interesting read for investors in other countries. Rocks are rocks, wherever they occur. Man has always mined (well, at least since the discovery of fire) and this book brings the mining industry back into the realm of everyday experience. If you have a dollar invested on any exchange where mining companies are listed you will probably benefit from reading it.
Available on amazon.com.
* Julie Garland McLellan is a professional non-executive director, board and governance consultant and mentor. She is the author of "Presenting to Boards", Dilemmas, Dilemmas: Practical Case Studies for Company Directors, "The Director's Dilemma", "All Above Board: Great Governance for the Government Sector" and numerous articles on corporate strategy and governance.
Julie Garland McLellan to judge 2011 Global eBook Awards