Guy on Rocks: It's risk-on again for investors, Elon Musk gives nickel a kick-along

‘Guy on Rocks’ is a Stockhead series looking at the significant happenings of the resources market each week.

Former geologist and experienced stockbroker Guy Le Page, director and responsible executive at Perth-based financial services provider RM Corporate Finance, shares his high conviction views on the market and his “hot stocks to watch”.

Market ructions

It’s risk-on for investors again as inflation becomes deflation.

“On the macro front, I think part of the swing towards commodities is sort of fuelled by that deflationary environment where in, with headline CPI drifting down to sort of negative 0.3 per cent, which is less than the forecast of around half a per cent, or the consensus,” Guy Le Page told Stockhead.

“I think that’s going to assist in seeing that move back into risk assets and commodities.”

Tesla bigwig Elon Musk also did the nickel market a solid by calling for miners to produce more of the metal.

“Obviously Elon Musk’s comments around nickel have spurred on nickel and re-emphasised its importance in stainless steel and obviously in electric cars,” Le Page said.

“We’re seeing nickel trading well above $US6 ($8.40) a pound. So thanks to Elon for that little kick along.”

Not to be outdone of course, gold futures hit $US2000 an ounce for the first time in history.

This has also lifted platinum and palladium prices, according to Le Page.

On the exploration front, the big news was Rio Tinto’s (ASX:RIO) maiden resource for the Winu project in the Paterson Province.

The very first resource estimate came in at 503 million tonnes at 0.45 per cent copper equivalent (CuEq).

“Not a particularly high-grade deposit but it’s certainly got scale,” Le Page said.

“So I think that’s going to drive a lot of investment in that part of the world for precious and base metals.”

Movers and shakers

Chesser Resources (ASX:CHZ) set the market alight this week after reporting some thick, high-grade gold hits from its West African gold project.

“They came out with an absolute cracking set of numbers from the Diamba Sud project in Senegal – 48m at 6.7 grams,” Le Page said.

The news sent the stock up almost 210 per cent to a new 52-week high of 32.5c. Shares are still trading at more than double what they were prior to the announcement.

Tribune Resources (ASX:TBR), meanwhile, delivered better-than-expected intersections from drilling at its Adiembra prospect in Ghana.

Le Page said they were “an equally impressive set of numbers”.

“It probably came in a lot higher grade than we expected and we’re anticipating that resource statement in about the next two to three weeks,” he said.

Blackstone Minerals (ASX:BSX) also made this week’s list of movers and shakers with some thick, significant grade nickel mineralisation down to depths of nearly 250m at its King Cobra prospect in Vietnam.

“They’re obviously getting big widths of pretty decent grade nickel,” Le Page said.

Current drilling at King Cobra has extended the zone at depth, and it remains ‘open’ down dip and along strike.

“It looks like it’s thickening with depth,” Le Page said. “So we could be dealing with a very large nickel sulphide system here.

“I think it’s probably the better nickel results coming out from any junior explorer in the nickel space at the moment and given the shortage of new discoveries on that front, I think that’s going to be one to watch.”

CHZ,TBR,BSX share price chart

Hot stocks to watch

New to Le Page’s watch list this week is Lithium Consolidated (ASX:LI3).

RM Corporate Finance was the lead manager for the company’s recently closed rights issue.

“They’ve been focused on lithium and gold in Mozambique and Zimbabwe, but the focus has sort of shifted back to Australia,” Le Page explained.

“They’ve got a suite of gold and base metal projects in the Yilgarn. I think they’ve got some interesting ground around Mt Magnet and Payne’s Find, but I think the most interesting project, which is a real wild card but is fascinating, is the Warriedar project, which is just south of Golden Grove.”

Golden Grove was a significant producer having delivered 40 million tonnes at 1.5 per cent copper and about 30 million tonnes at 15 per cent zinc.

Le Page says Lithium Consolidated’s Warriedar project has shown evidence it hosts extensions of the Golden Grove sequence.

“They’ve got about 300sqkm, so quite a reasonably large tenement,” Le Page said.

“But this VMS, volcanogenic massive sulphide, horizon which is coincident with some magnetics has never been tested. So that’s a reasonably significant strike length.”

Le Page says the strike arcs around in a horseshoe-type shape for about 15km.

“Previous explorers have picked up plenty of gold and base metal anomalies, but this particular area hasn’t been explored,” he noted.

“If you look at its location, you’re 20km from the Minjar and Golden Grove mines, two pretty significant producers. You’ve got 25km all up of prospective greenstones with the felsic volcanics – the same host at Golden Grove and Minjar.”

“That gives you 2km by 5km intrusive targets. So I think that’s going to be really interesting.”

“I think the rest of their projects have potential, but I think that is one that could really transform the company.”

Lithium Consolidated as a “fairly modest” enterprise value (market cap + debt – cash) of less than $4m, according to Le Page.

“I think that’s pretty good leverage in a market where valuations are getting stretched, particularly on the gold front.”

Lithium Consolidated (ASX:LI3) share price chart

Le Page also reckons Venture Minerals (ASX:VMS) still looks “ridiculously cheap”, but has potential.

What makes Venture so intriguing, according to Le Page, is the potential for near-term cashflow from its small but high-grade Riley iron ore project in Tasmania.

“I don’t think the market believes they can deliver the iron ore project, or that’s what the market is telling me, but if they can deliver it there’s going to be a lot of upside in that share price in a very short space of time,” he said.

“So I think that will be a fascinating watch in the next three weeks.”

Venture is currently in a trading halt pending news of a capital raising.

Venture Minerals (ASX:VMS) share price chart

At RM Corporate Finance, Guy Le Page is involved in a range of corporate initiatives from mergers and acquisitions, initial public offerings to valuations, consulting and corporate advisory roles.

He was head of research at Morgan Stockbroking Limited (Perth) prior to joining Tolhurst Noall as a Corporate Advisor in July 1998. Prior to entering the stockbroking industry, he spent 10 years as an exploration and mining geologist in Australia, Canada and the United States.

At Stockhead, we tell it like it is. While Chesser Resources and Blackstone Minerals are Stockhead advertisers, they did not sponsor this article.

The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.

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