Encounter Resources, ENR, up another 20% on West Arunta find

Sometimes mining companies really do strike large deposits - what seems to be happening with Encounter and West Arunta

Encounter Resources (ASX: ENR) is up another 20% today on the results from their exploration of the West Arunta find. This puts them up some 100% over the past 6 weeks - the sort of result we'd like from many a junior miner. It's also a good example of why, despite the risks, junior miners are such a good speculative market. There really are - sometimes, obviously - real results which lead to significant changes in share prices. They might not always be maintained and so on but the essence of a trading strategy is that there have to be price changes which can then be traded. Something the world of junior miners does provide for us.

The West Arunta find is very early days as yet, very early days indeed. We're at the stage of people looking at radar pictures taken from airplanes here - this is long before anyone starts drilling to confirm and so on. So there's no knowledge of what is there, only knowledge of something interesting to have a closer look at. These don't always work out. So, Encounter most certainly isn't an investment stock at this point. There's way too much risk for this to be a buy and tuck it away share. This is a trading share, not an investing one at ENR.

Encounter Resources share price from ASX

The full announcement about West Arunta is here. As we can see we're working by implication here. Other miners have found, in the area and with similar geological signs, interesting deposits. There are anomalies in the radar pictures that need to be investigated further. So, we are at that early stage - something to look at more. Sometimes these do turn into the beginnings of vast mines. More often they turn out to not be economic for some reason or other. There are many reasons a mine can fail and only one as to why it will succeed. This is not news that there will be a mine here. This is news that the exploration has not failed yet - that's not quite right but that's a useful way of thinking of it at times. 

That 100% price move on such slender evidence of future riches is exactly why junior miners are such an enjoyable speculative field. But it always has to be remembered that this is speculation. Not only don't we know, nor do the miners themselves, how this will all turn out. That risk is precisely why we get such large price moves in junior miners.