For those who believe that the music will never stop, like the market’s most oft-quoted bull, Charlie Aitken, Flinders Diamonds should be a warning bell. Yesterday, the company, which despite its name doesn’t produce any diamonds (actually, it doesn’t produce anything) increased by 790%.

Flinders, which last year made a loss of $9,549, saw its share price increase from 1 cent to 8.9 cents per share, after the company announced “an independent review of the iron ore potential at its Hamersley tenement E47/882 … has outlined an exploration target of between 325 and 390 million tonnes of iron ore.”

However, it should be noted that the company hasn’t actually drilled any holes at the tenement yet. The resource has simply been “inferred”.

Flinders also noted in its Annual Report that in 2005 the company reached a deal with Andrew Forrest’s Fortescue Mining under which the junior miner would receive a 1% royalty from Fortescue’s mining. The AFR noted today that “about 220 million tonnes of Fortescue’s new 1 billion resources released last week lies on Flinders’ ground”.

Flinders’ rapid share price appreciation sounds a lot like 1969, when every company which announced that it had pegged a stake within shouting distance of Poseidon’s infamous, salty, Windarra nickel deposit, would see their scrip leap by hundreds of percent. Poseidon itself rose from a mere 80 cents to $280 in a matter of months, only to fall right back down to earth.

As noted by Trevor Sykes in The Money Miners (which should be compulsory reading for anyone investing in resources stocks):

It was not until September 1974 that production of nickel concentrates begun at Windarra. Then, in addition to other woes, Poseidon struck mine problems. [Further], low nickel prices were making Windarra only marginally economic. Poseidon now had large debt commitments and had been late to see the storm signals. It had maintained lavish offices and high exploration expenditure.

… then, Poseidon canvassed other major Australian miners and still received no offer for its once priceless mine. The AIDC as the major creditor appointed a receiver. Had it been any company other than Poseidon a receiver would have been appointed much earlier.

The Windarra mine closed in 1978. Poseidon itself was later acquired by Robert De Crespigny’s Normandy Mining (with WMC having acquired Windarra).

In a touch of irony, the Windarra mine is now owned by a company called Poseidon (formerly Niagara Mining), which is chaired by none other than Australia’s third richest man, Andrew Forrest, Flinders’ next door neighbour.

Meanwhile, while the market waits for Flinders’ eventual drilling results, no one will accuse the company of being flippant with shareholders funds. Last year, Flinders noted that its legal fees were $4,834. Barely a day’s work for one of the big city firms.