The Poseidon bubble was a

stock market bubble A stock market bubble is a type of economic bubble taking place in stock markets when market participants drive stock prices above their value in relation to some system of stock valuation. Behavioral finance theory attributes stock market bub ...

in which the price of

Australia Australia, officially the Commonwealth of Australia, is a Sovereign state, sovereign country comprising the mainland of the Australia (continent), Australian continent, the island of Tasmania, and numerous List of islands of Australia, sma ...

mining Mining is the extraction of valuable minerals or other geological materials from the Earth, usually from an ore body, lode, vein, seam, reef, or placer deposit. The exploitation of these deposits for raw material is based on the economic via ...

shares In financial markets, a share is a unit of equity ownership in the capital stock of a corporation, and can refer to units of mutual funds, limited partnerships, and real estate investment trusts. Share capital refers to all of the shares of an ...

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 Nickel is a chemical element with 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 slow to ...

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 Vale Canada Limited (formerly Vale Inco, CVRD Inco and Inco Limited; for corporate branding purposes simply known as "Vale" and pronounced in English) is a wholly owned subsidiary of the Brazilian mining company Vale. Vale's nickel mining and ...

. 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 Laverton, originally known as British Flag, is a town in the Goldfields region of Western Australia, and the centre of administration for the Shire of Laverton. The town of Laverton is located at the western edge of the Great Victoria Desert, n ...

. 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 information ...

(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 shortly. (It can also refer to short sales in which the speculator hopes for a decline i ...

. At one point, a UK

broker A broker is a person or firm who arranges transactions between a buyer and a seller 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 role should be confu ...

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 Australian Securities Exchange Ltd or ASX, is an Australian public company that operates Australia's primary securities exchange, the Australian Securities Exchange (sometimes referred to outside of Australia as, or confused within Australia as ...

All Mining

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rose by 44%. Mining stocks peaked in January 1970, then immediately

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. 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 th ...

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

regulation Regulation is the management of complex systems according to a set of rules and trends. In systems theory, these types of rules exist in various fields of biology and society, but the term has slightly different meanings according to context. For ...

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, as ...

s, which ultimately led to Australia's national companies and securities legislation.

References

Further reading