Mining for investment: let social media do the digging

As any iron-ore geologist will testify, treasure is sometimes found in the most surprising of places- and so it is with mining investment and social media.

With the current uncertainty around the iron ore price, investors for capital ventures are hard to find. And when times are tight for the likes of BHP, Rio and Vale, as they are at present, then you can be sure junior miners and explorers are feeling the pinch far more acutely.

Under traditional investor-relations practices, it’s virtually impossible for a small-cap listed company to compete for the attention of investors on an equal footing against a huge multinational rival. But social media is changing that paradigm.

Junior miners and other smaller listed companies are increasingly turning to social media – Twitter, LinkedIn, blogs and other online engagement tools – to connect with potential investors. They are finding that not only is social media highly cost-effective and relatively inexpensive, it also presents a very powerful channel for direct communication.

Previously, large-cap listed companies had always benefited ongoing coverage in the financial press and extensive market commentary, putting smaller offering at a severe disadvantage in the battle to gain the attention of potential investors and shareholders.

The beauty of social media, for junior miners, is that it provides a single meretricious platform for all-comers.

Social media report by London based Metal Pages

An in-depth report by the London-based blog Metal Pages, called ‘Go public before the IPO’ on the social media revolution in investor relations, gives evidence that a well-executed social media programme initiated long before an IPO can help a company to build an investor base and establish a strong public profile before a listing.

Additionally, for companies already listed, a solid following in the social media arena can help with the success of rights issues, private placements and other funds-raising activity.

The Metal Pages report said: “Social media platforms greatly enhance the efficiency of information dissemination through the investment community and this can give small caps including junior mining companies a much bigger reach and the ability to cultivate a higher profile. In effect they can build their own investor communities and cultivate investor loyalty.”

The report quoted several academic studies on the effect of social media on investment, including one by the TUM School of Management in Munich, called ‘Tweets and Trades: The Information Content of Stock Micro blogs’.  The Munich study found a correlation between Twitter volumes concerning a listed company and trading volumes in its shares. “Message volume can predict next day trading volume,” it noted.

Iron Road cited as case study for social media

• The Metal Pages report also looked at Iron Road’s extensive use of blogs, Facebook, Twitter and an application called paper.li, which allows users to publish their own online ‘newspaper’ and distribute it via Twitter.

Anthony Anderson, business development manager, Corporate Zest – the company that handles Iron Road’s social media presence – said the problem for small companies is that they rarely get a voice from either the press or brokers. So they have to create their own story and get it heard. The only way to effectively do this is via social media.

“Social media is a very cost effective option for spreading the word far and wide,” says Anderson. @Social media builds investor loyalty because there is a continuous dialogue that investors can follow.”