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Beowulf Mining On A Tear – Will It Continue?

Tim Worstall
Tim Worstall trader
Updated 3 Dec 2021

Beowulf Mining (LON:BEM) is up 32% this morning and has doubled so far this week. The question is, why?

The answer being that it’s a small mining company, what is called a “junior miner”, and small changes in prospects end up being leveraged into large changes in the share price. Significant price changes are therefore something that can come from one or more pieces of news which is what has just happened. The bigger question then becomes whether the price change is going to continue on the back of the news. Are we in a momentum trade here, a significant rerating of the stock, or is this a bounce that will fade away as the impact of the recent news fades?

Of such decisions in highly volatile stocks are trading strategies made.

The background is that Beowulf Mining has two interesting prospects in the Nordic countries. One is an old iron ore mine in Northern Sweden, at Kallak. There’s nothing wrong with Swedish iron ore, in fact it has been known for centuries for its purity. German reliance upon it produced some unpleasantness last century but it exploitation of the deposits goes back centuries further than that.

The other is a graphite prospect in Finland. Graphite is newly important as a component of batters for the new electric vehicle revolution. Searches for decent deposits are going on globally.

The problem with both of these prospects has been political. Varied groups are opposing the very idea of mining in such areas – might disturb the reindeer for example. Or the tourist industry. As ever with political problems a change in politics can lead to a substantial change in sentiment over the prospects for a or many projects.

The recent change in government in Sweden has – as the company has announced – led to ministerial announcements that more mines might be a good idea. This is nothing so specific as a claim about Beowulf’s own ambitions but is something of a sea change in the general political background.

There are also mutterings about movement in Finland on the similar issues there.

Mutterings being the right word to us. For there is no certainty about anything here. Except, well, we can rely upon the mine estimations, they’re solid and based upon a legal reality. It’s not so much whether the respective minerals are there, it’s whether permission to extract can be gained. Even after that there’s all the work on exactly how, who will finance to what extent and so on. But at this stage the major price determinant is “Will permission be granted?”. So, the price moves on sentiment about whether such permission will be granted. Which is exactly what is happening.

The volatility is there for trading to be interesting. The question then becomes is this a momentum trade, pile in because everyone else is? Has political reality changed so much that a significant rerating should occur? Or should we expect interest and the price to decline again as the news fades out of recent memory?

Tim Worstall
Tim Worstall is a freelance writer specialising in economics and the financial markets.