By Alice Uribe
SYDNEY--A new 'gold rush' could be in the offing, as more Australian gold companies seek to cross-trade in the U.S., hoping to broaden their investor base and raise capital amid record high prices for the precious metal.
The types of exploration companies looking to tap U.S. investors can track the rises and declines in the resources sector, according to one marketplace that allows investors to buy and sell stocks not listed on U.S. exchanges. Recently, there has been growing interest from Australian-listed gold companies considering trading over-the-counter in the U.S.
"Right now, gold is hot. You're seeing a lot more interest in gold companies, and so the pipeline looks a little stronger in that sector, " said Jason Paltrowitz, executive vice-president for corporate services at OTC Markets, commenting on trends for potential new entrants onto its marketplaces.
Interest in different resources companies "moves in and out, depending on what resource is hot," Paltrowitz said.
Gold is ticking that box currently. Prices for the precious metal have surged over the past year, but that hasn't been reflected yet in the stock prices of the gold companies themselves. While it isn't unusual for gold stocks to lag behind gains in bullion prices, some analysts are becoming more optimistic about the outlook for the sector.
They forecast even higher metal prices that could gift gold companies a huge bump in margins, even as investors have been wary about whether some will be able to dig up as much gold as they plan to, which has so far weighed on stock prices.
There has been increased interest from investors in gold companies on OTC Markets' marketplaces, particularly from the high-net-worth retail community, Paltrowitz said.
"While we obviously cannot predict market movements, we have observed increased investor interest on this sector, and this region," he said, referring to Australia.
Trading over-the-counter can provide a way for companies to access more capital or broaden their investor contingent, without delisting from their home market and relisting on the major U.S. exchanges, or cross-listing in both markets. Paltrowitz said interest from companies to cross-trade was often inbound.
ASX-listed Westgold Resources, a recent addition to one of OTC Market's premium marketplaces, said trading there would boost the visibility and accessibility of its stock to retail, HNW and institutional investors in the U.S.
The OTC Market quotation supported growing interest in the company amid improved profitability, "and makes Westgold more readily accessible to a wider audience," Westgold Managing Director Wayne Bramwell said in January in an ASX disclosure announcing its commencement of trading.
There are around 70 Australian companies, including gold companies, cross-trading on OTC Market's two premium markets, of which 58% are in the resource sector. Canada - another resource-rich country- has around 1,000 companies represented.
Companies focused on rare earths continue to be key issuers for OTC Markets, with gold companies running second, said Paltrowitz.
"While they are not mutually exclusive, there are U.S. investors who are interested in gold, and investors interested in rare earths, so the diversity of U.S. interest in resources and mining means that there are always pockets in the U.S. that historically have had investor interest," he said.
Lithium--the metal used to make electric-vehicle batteries--has given investors whiplash when it comes to pricing. Companies in this sector have so far maintained their presence on OTC Markets.
"These companies are still holding on to see if the recent rise in lithium is sustained," Paltrowitz said.
As of earlier this month, lithium companies including Atlantic Lithium, Arizona Lithium and Jindalee Lithium remained on OTC Markets' premium marketplaces.
Write to Alice Uribe at alice.uribe@wsj.com
(END) Dow Jones Newswires
June 16, 2024 22:28 ET (02:28 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
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