MoneyTalks: Three critical minerals stocks and commodities Sanlam has a watchful eye on

MoneyTalks is Stockhead’s regular recap of the ASX stocks, sectors and trends that fund managers and analysts are looking at right now.

Today we hear from Sanlam Private Wealth senior investment advisor Ben Faulkner.

With the Australian Government pledging to invest in a range of measures to secure critical minerals-processing industries in the nation, there is no better time than now to be looking at ASX companies with critical minerals exposure.

Deposits of commodities such as copper, nickel, silver, lead, zinc and even lesser-known minerals like indium will be needed to develop renewable energy technologies and achieve the government’s net-zero carbon emissions target.

This is why Sanlam’s Ben Faulkner sees value in the critical minerals space – from his point of view, these types of commodities, the ones listed under various Western governments’ critical minerals lists, will provide long-term rewards to investors.

“We take a contrarian view on nickel, yes the market is at cyclical lows but we believe there is a lot of negative noise and sentiment around the metal given what has happened with the nickel price due to oversupply out of Indonesia,” he says.

“BHP also recently announced the shutdown of their Western Australian nickel operations, and they only turn off supply when the market has bottomed out.

“We think we are at a low point in the nickel cycle right now, where it has traditionally been in over supply and it should balance out from here, paving the way for higher nickel prices in 2025 going forward.”

Copper forecasts estimate deficits in supply going forward with things starting to go a bit awry in May when the copper price experienced a short-lived bounce.

“The copper price had a bit of a short squeeze in various futures markets – it rallied then dropped back down but we still see structural deficit taking place.

“And silver, there’s several factors contributing to why we like it – firstly there are multiple government subsidies globally for solar panels, but it also has a major use in semiconductors and micro chips, which will make a big impact in the years ahead with AI,” he says.

“It’s also used in nuclear reactors, another industry that has gained traction this year off the back of the energy transition.”

Top picks

Taiton Resources (ASX:T88)

Taiton listed 18 months ago but has gone under the radar for many investors.

The explorer’s Highway project hosts shallow magmatic-hydrothermal mineralisation interpreted to have formed at the same time as the world-class Olympic Dam deposit in South Australia’s Gawler Craton.

Olympic Dam is one of the one of the world’s largest iron-oxide-copper-gold (IOCG) deposits and the fourth largest copper deposit globally.

From a real estate perspective, Faulkner says they are in the right area given their project is surrounded by the likes of Prominent Hill, Olympic Dam and Carrapateena.

Soil sampling carried out by Taiton in the second half of 2023 identified a coherent 2.5km molybdenum anomaly and maiden drilling completed later that year confirmed the presence of molybdenum at the Merino prospect.

“The recent exploration results have highlighted several styles of mineralisation which have equal potential for success, the IOCG prospectivity in particular is in line with their earlier findings that they have the same signature rocks as Olympic Dam,” Faulkner says.

“I have no doubt they hold the potential to make a huge IOCG discovery similar to the likes of Olympic Dam.”

Faulkner says the company has around 53m shares on issue and a market cap of $7m at the current share price, offering exploration and discovery upside.

Iltani Resources (ASX:ILT)

ILT listed on the ASX in June 2023 and has achieved a great deal in a little over 12 months, Faulkner says.

The company’s flagship project is the Orient asset in north Queensland, an extensive precious metal-rich epithermal system which hosts multiple high-grade zinc-lead-silver-indium veins and stockworks outcropping over at least 4km2 area.

“Since June 2023, Iltani has completed 30 RC holes (6,224m drilled) targeting shallow epithermal mineralisation at Orient West and East,” Faulkner says.

“Drilling has intersected multiple high-grade, silver-lead-zinc-indium vein zones within a broad background of lower-grade mineralisation and confirms open pit (bulk tonnage) potential.

“I believe the Orient projects is shaping up to be one of Australia’s most exciting silver-indium project, one that could become a significant Australian producer of silver and critical minerals.

“Following the extensive drill programs recently completed we estimate ILT will have enough data to produce an exploration target.

“This exploration target has the potential to be higher grade and as large over time to the likes of the Bowdens project owned by Silver Mines.

“The company has only 41m shares on issue and a modest market cap of $9m versus Silver Mines $265m. So we think ILT offers good leverage to further exploration success.”

Western Mines Group (ASX:WMG)

WMG’s exploration team is led by well-known nickel expert Dr Ben Grguric, who previously worked at BHP’s nickel operations.

The company owns the Mulga Tank project, which unveiled the discovery of a major komatiite hosted nickel sulphide mineral system under cover in WA.

“We believe it is an exceptional project with a globally significant exploration target of 350Mt to 2,200Mt at 0.24- 0.35% nickel,” Faulkner says.

“WMG has continued aggressive exploration regardless of the noise and negative sentiment in the nickel market at the moment.

“Many juniors flip around to the ‘hottest’ commodity whereas WMG has been dedicated to exploration at Mulga Tank over three years as it’s a world-class quality project and this has paid off for them,” he says.

“Highly successful exploration results from the first drill hole have found millions of tonnes of contained nickel in sulphide form and there aren’t many other companies that have deposits like this in Australia apart from Mt Keith, owned by BHP.

“In fact, Mulga Tank is very similar to Mt Keith and a perfect asset for the likes of a major mining company in time as the project continues to develop.”

Sanlam Private Wealth was lead manager to the IPOs of the companies listed above and earned fees from those and other capital-raising services. Sanlam staff and Ben Faulkner are also shareholders of all three companies mentioned above.

At Stockhead we tell it like it is. While Iltani Resources is a Stockhead advertisers, it did not sponsor this article.

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

Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.