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Money Talks: Here are 3 mining and exploration stocks with plenty of upside
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We tap our extensive list of experts in Money Talks — Stockhead’s regular drill down into the sectors and companies that investors have their eye on right now.
Today, we hear from Guy Le Page, director and responsible executive at Perth-based financial services provider RM Corporate Finance.
Analysts believe the supportive fundamentals for copper, cobalt and nickel are being drowned out by headwinds from the US-China trade war. A sustained price recovery is coming, they say.
Le Page agrees.
“The big mover in metals markets is really demand, not supply,” he says.
“While we have seen some supply tightness, that demand hasn’t kicked in yet.”
Take cobalt for example. Despite some big mine shutdowns in the DRC — which should put it at the top of anyone’s bullish list — the price hasn’t moved very much.
“Having said that, I think some of the [new] longer-term contracts are being done at well above spot,” Le Page says.
On the nickel front, Le Page believes prices will pick up later in the year following a seasonal drop in demand from China.
“A lot of forecasts are looking at well beyond $US7 ($10.49) to $US7.50/lb ($11.24/lb) over the next 48 months (currently about $US5.90/lb),” he says.
“It’s been 12 years since nickel ran up to $US50,000/t ($US22.67/lb). I’m not saying we will hit those highs again, but a run is coming.
“And with the Australian currency where it is, some of the local juniors with advanced projects look pretty interesting.”
Likewise, copper has been hit by global uncertainty, but the demand-supply fundamentals look very good.
“Inventories are shrinking, and we are looking at a supply deficit by mid-2020,” Le Page says.
“If we get a bit of a leg up from the global economy, I think you will see that push higher.”
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Market Cap: $5.4m
12-month return: Flat
Le Page is on the board of microcap Mount Ridley Mines, which recently acquired Greenland-based explorer Longland Resources.
Longland owns the underexplored 3,889sqkm Ryberg nickel-copper-cobalt-palladium-gold project on the remote east coast of Greenland.
In 2017, a magnetic survey over the western boundary of the licence area revealed three big targets — between 60m and 240m vertical depth — underneath substantial high-grade surface mineralisation.
“The Ryberg asset [has] high-grade copper, cobalt, nickel, gold and palladium over 50km of strike,” Le Page says.
“Could be an interesting year, I think.”
Market Cap: $14m
12-month return: +14 per cent
Le Page expects small, high-grade iron ore hopeful Fenix to mount a share price recovery.
“There’s been a bit of short-term weakness in the iron ore price,” he says.
“As the iron ore price has come off so has the Fenix share price – it hit 15c briefly and is currently sitting around 5c, but I think it will bounce back.”
Fenix says the 1.25-million-tonne-per-annum Iron Ridge project will cost about $11.9m to build – almost half of which will be deferred until the first shipment is made – for average annual earnings before tax of $16.4m.
This is based on an iron ore price of $111.43/t (currently ~$122/t) and an AU/US exchange rate of 70c (currently 67c).
“Fenix’s C3 costs should be around $90/t, which is still a pretty good margin for that project,” Le Page says.
Market Cap: $280m
12-month return: +30 per cent
On the gold front, Le Page likes the look of Tribune, which he calls “tightly held, a bit of an enigma, and certainly not flavour of the month”.
“Yet it’s one of the highest returning gold stocks on the ASX over the past 20 years [at about 5900 per cent],” he says.
“They are producing in excess of 80,000 ounces a year. They aren’t the biggest producer, but they certainly have one of the best margins.”
Then there’s the exploration upside.
Tribune recently kicked off a very big 50,000m drill program at the Japa project in Ghana, and is about to start drilling in the Philippines at a project which has the potential to be “well in excess of 1 million ounces”, Le Page says.
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.
