The Poseidon bubble was a stock market bubble in which the price of

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mining Mining is the Resource extraction, extraction of valuable geological materials and minerals from the surface of the Earth. Mining is required to obtain most materials that cannot be grown through agriculture, agricultural processes, or feasib ...

shares In financial markets, a share (sometimes referred to as stock or equity) is a unit of equity ownership in the capital stock of a corporation. It can refer to units of mutual funds, limited partnerships, and real estate investment trusts. Sha ...

soared in late 1969, then crashed in early 1970. It was triggered by the discovery by Poseidon NL of the early indications of a promising

nickel Nickel is a chemical element; it has symbol Ni and atomic number 28. It is a silvery-white lustrous metal with a slight golden tinge. Nickel is a hard and ductile transition metal. Pure nickel is chemically reactive, but large pieces are slo ...

deposit in September 1969. In the late 1960s,

was in high demand due to the

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, but there was a shortage of supply due to

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against the major

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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) on the

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market early in November 1969. In September 1969, the mineral exploration company Poseidon NL made a major nickel discovery at Mount Windarra northwest of Laverton, Western Australia. In early September its shares, which had been trading at $0.80, began rising on

insider trading Insider trading is the trading of a public company's stock or other securities (such as bonds or stock options) based on material, nonpublic information about the company. In various countries, some kinds of trading based on insider informati ...

(which was not illegal at the time). On 1 October, Poseidon announced that drilling had struck 40 metres of ore averaging 3.56% nickel and the share price immediately rose until Poseidon shares were trading at $12.30. After that, very little further information came to light but the price continued to climb on

speculation In finance, speculation is the purchase of an asset (a commodity, good (economics), goods, or real estate) with the hope that it will become more valuable in a brief amount of time. It can also refer to short sales in which the speculator hope ...

. At one point, a UK

broker A broker is a person or entity that arranges transactions between a buyer and a seller. This may be done for a commission when the deal is executed. A broker who also acts as a seller or as a buyer becomes a principal party to the deal. Neither ...

suggested a value of up to $382 a share. 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

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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. 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 it went into receivership in 1974. The company was delisted from the

stock exchange A stock exchange, securities exchange, or bourse is an exchange where stockbrokers and traders can buy and sell securities, such as shares of stock, bonds and other financial instruments. Stock exchanges may also provide facilities for ...

in 1976. Western Mining then took over management of the mine, operating it until 1991. Mining ceased at Mount Windarra in 1989, and at South Windarra in 1991. Mount Windarra produced 5.3 million tonnes of ore grading 1.5% nickel during the life of the mine. In 1974, the Rae Committee handed down its report on the Poseidon bubble, which documented numerous cases of improper trade practices. It recommended a number of changes to the

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stock market A stock market, equity market, or share market is the aggregation of buyers and sellers of stocks (also called shares), which represent ownership claims on businesses; these may include ''securities'' listed on a public stock exchange a ...

s, which ultimately led to Australia's national companies and securities legislation. Poseidon Limited entered receivership in September 1976, unable to meet its loan repayments but did survive its time in receivership and was relisted on the Australian stock market in December 1978. Poseidon eventually merged with Robert Champion de Crespigny-led Normandy Resources in 1991, with Poseidon being delisted on 8 May 1991 and the name company taking the name of Normandy Poseidon Limited.

References

Further reading