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Poseidon bubble

From Wikipedia, the free encyclopedia

Poseidon Bubble
Poseidon Bubble graph, depicting a massive price bubble between 1969 and 1970
A graph of nickel prices during the bubble
DateSeptember 1, 1969 – January 1, 1970 (1969-09-01 – 1970-01-01)
Duration4 months
LocationAustralia
TypeStock market bubble
CauseDiscovery of nickel during a shortage
Poseidon Nickel Limited
Public
Traded asASXPOS
IndustryMining
Founded1969; 50 years ago (1969)
Headquarters,
Australia
Websitehttp://poseidon-nickel.com.au

The Poseidon bubble was a stock market bubble in which the price of Australian mining shares soared in late 1969, then crashed in early 1970. It was triggered by the discovery by Poseidon Nickel of the early indications of a promising nickel deposit in September 1969.

In the late 1960s, nickel was in high demand due to the Vietnam War,[1] but there was a shortage of supply due to industrial action against the major Canadian supplier Inco. These factors pushed the price of nickel to record levels, peaking at around £7,000/ton (£113,000 in 2018 adjusted for inflation)[2] on the London market early in November 1969.[3] In September 1969, the mineral exploration company Poseidon NL made a major nickel discovery at Mount Windarra 22 kilometres (14 mi) northwest of Laverton, Western Australia. In early September its shares, which had been trading at $0.80, began rising on insider trading (at that time insider trading was not illegal). On 1 October Poseidon announced that drilling had struck 40 metres of ore averaging 3.56% nickel and the price immediately rose until it was trading at $12.30. After this very little further information came to light but the price continued to climb on speculation; at one point, a UK broker suggested a value of up to $382 a share.[4][3]

The price of Poseidon shares quickly became too high for many investors, so some turned to stocks in other companies exploring near Windarra, and eventually other nickel mining stocks in general. As the price of mining shares grew, new companies were listed by promoters hoping to cash in. From October to December 1969 the ASX All Mining index rose by 44%. Mining stocks peaked in January 1970, then immediately crashed. Poseidon shares peaked at an intraday high of $280 in February 1970, and fell rapidly thereafter.[3]

By the time Poseidon actually started producing nickel, the price of nickel had fallen. Also, the nickel ore was of a lower grade than originally thought and extraction costs were higher. Profits from the mine were not sufficient to keep Poseidon afloat, and in 1974 it went into receivership. Western Mining then took over management of the mine, operating it until 1991. Mount Windarra produced 5.3 million tonnes of ore grading 1.5% nickel during its minelife.[5][3]

In 1974, the Rae Committee handed down its report on the Poseidon bubble, in which it documented numerous cases of improper trade practices. It recommended a number of changes to the regulation of stock markets, which ultimately led to Australia's national companies and securities legislation.[6]

In the late 1900s, Robert Champion de Crespigny's Normandy Resources took over Poseidon, becoming Normandy Poseidon, the largest gold miner in Australia. In 2001 Normandy Mining was taken over by the Newmont Mining Corporation, which also at that time acquired Canadian company Franco-Nevada. The acquisitions made Newmont the world's largest producer of gold.[7]

References

  1. ^ Fernando, Vincent (11 October 2010). "The 10 Most Ridiculous Price Bubbles In History". Business Insider. Retrieved 14 May 2019.
  2. ^ "Inflation calculator". Bank of England. London. Retrieved 14 May 2019.
  3. ^ a b c d Simon, John (19 March 2003). "Three Australian Asset-price Bubbles" (PDF). Reserve Bank of Australia. Retrieved 14 May 2019.
  4. ^ Sykes, Trevor (3 October 2013). "Norm Shierlaw: Miner's punt on Poseidon paid dividends". Sydney Morning Herald. Retrieved 14 May 2019.
  5. ^ "Windarra Heritage Trail" (PDF). Department of Biodiversity, Conservation and Attractions Library. WMC Resources. Retrieved 14 May 2019.
  6. ^ "Australian Securities Markets and their Regulation: Report from the Senate Select Committee on Securities and Exchange" (PDF). Australian Government Takeovers Panel. Canberra: Australian Government Publishing Service. 1974. Retrieved 14 May 2019.
  7. ^ "Our History". Newmont Mining Corporation. 2010. Archived from the original on 26 November 2010. Retrieved 20 November 2010.

Further reading

  • Weekend News Saturday January 10, 1970 - p. 10 -W.A. Shareholders in Poseidon and Poseidon slip $24.66 in London
  • Adamson, Graeme.(1989) Miners and millionaires : the first one hundred years of the people, markets and companies of the stock exchange in Perth, 1889-1989 Perth, W.A : Australian Stock Exchange(Perth) Limited. ISBN 1-875262-00-8
This page was last edited on 20 July 2019, at 08:38
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