MoneyTalks: Three stocks to butter your bread with in these turbulent times

MoneyTalks is Stockhead’s regular drill down into what stocks investors are looking at right now. We’ll tap our extensive list of experts to hear what’s hot, their top picks, and what they’re looking out for.

Today we hear from Discovery Capital Partners managing director Adam Miethke.

WHAT’S HOT?

Lithium, battery metals and energy are hot plays right now, and you’ve read plenty of experts in this column give their take on why the time is still ripe to play those themes.

Discovery Capital Partners managing director Adam Miethke has seen the interest from the market first-hand when it comes to that.

“The battery metal space, I totally get it, we’ve probably got less clients in those spaces,” he told Stockhead.

“But that being said, we’ve raised money for Alchemy Resources (ASX:ALY) last week, they’ve got the potential extension of (Global Lithium’s) Manna on their ground, and going out to raise money for a company like that with a project like that — even though there’s a nearology aspect to it, it was pretty hot property.

“Probably that was the quickest capital raise we’ve ever done. It was done and dusted by lunchtime on day one.”

But Miethke isn’t so interested in thematics. He’s still likes stocks in the “bread and butter commodities”, focused on explorers that have good projects on their books.

“I guess that’s one of the things that differentiates the way we work, is rather than just playing a thematic trade — like ‘this sector’s hot let’s try and do a deal’ — for us, it’s more about bottom up, picking assets for their quality,” he said.

“I’m still passionate about all the bread and butter commodities, your golds, coppers, the broader base metals complex.”

Beyond the markets

By and large the market is not rewarding small caps in less fashionable sectors like gold right now, but Miethke says it’s important to look beyond the hype and really do research about a company’s assets.

Sector trades can work for some, it all depends on your risk profile and trading timeframe.

“Some people are short term minded, they’re happy to make a quick trade and pick a commodity that’s hot but maybe not be in it for the long haul,” Miethke said.

“And then you’ve got investors that believe in the fundamentals of a particular company or asset, and they’re there for a three- to five-year time horizon. You can see through some market cycles with those sorts of opportunities.

“There’s no right product for everyone, (but) whatever’s hot at the time tends to be the easiest thing to raise money for.”

With commodity markets struggling to fire in turbulent times amid rate rises, demand concerns and recession risks, we asked Miethke for three small-cap explorers with assets worth taking a look at.

TOP PICKS

ALCHEMY RESOURCES (ASX:ALY)

The aforementioned Alchemy recently raised $5.5 million at 2.5c a share to fund drilling at a range of gold, lithium and base metals projects across WA and New South Wales.

But what has drawn investors into the James Wilson-led penny stock in the past month is its victory in the ballot for a hot exploration tenement at the flagship Karonie project 120km east of Kalgoorlie, strategically located on the doorstep of Global Lithium Resources’ (ASX:GL1) Manna deposit.

GL1 boasts a resource estimate across the border of 9.9Mt at 1.14% Li2O and 49ppm Ta2O5.

Breaker Resources’ (ASX:BRB) 1.7Moz Lake Roe gold deposit is also nearby.

“I think the fundamentals of the geology are there to support a reason to drill,” Miethke said.

“You’ve got a fantastic lithium project, Manna, just over the border, you’ve got very similar rocks and geology that go into their ground.

“Ultimately, they acquired the ground to look for gold, so there’s gold prospectivity, but by virtue of the region they’re in there’s also potential for lithium.

“So I think it’s going to be a pretty exciting program for them when they start turning the drill bit in the coming weeks.”

Alchemy Resources (ASX:ALY) share price today:

92Energy (ASX:92E)

Uranium is a sector Miethke likes.

“I’ve got a longer term view on uranium. And while it’s not going to happen tomorrow, I think ultimately, if we go into this green energy sort of future it has a place.”

He points to 92Energy, which owns five projects in Canada’s Athabasca Basin, the area where Cameco owns two of the world’s largest high grade uranium mines at Cigar Lake and McArthur River.

“If you’re looking for big, high grade uranium projects, that’s where you want to be, that’s where most of them are,” Miethke said.

“It’s a good jurisdiction to be able to build uranium projects, there’s a lot of active processing facilities so you can get things done up there.

“They’ve got what appears to be a new discovery, they’ve put a few holes into it, the numbers are looking good.”

92E made a discovery at its Gemini project called GMZ last year, following up this year with high grade hits such as 43m at 0.61% U3O8 (including 6m at 2.17% U308).

That is nowhere near the outlandish 15% plus grades seen at Cameco’s Cigar Lake, but many times higher than the average grade across the world’s operating uranium mines.

Also operating in the Athabasca Basin is the hot CAD$2.44 billion dual-listed Canadian developer NexGen Energy (ASX:NXG).

“This one is a lot cheaper than NexGen, so there’s a lot of leverage to further discovery,” Miethke said.

92Energy (ASX:92E) share price today:

Alvo Minerals (ASX:ALV)

Miethke’s last junior pick, Alvo Minerals, owns the Palma copper-zinc VMS project in central Brazil, which already boasts a resource across the C1 and C3 deposits of 4.6Mt at 1% copper, 3% zinc, 0.4% lead and 20ppm silver for 44,000t Cu, 179,000t Zn, 20,000t Pb and 3Moz Ag.

“I’m a big fan of copper as well. I think there’s limited ways to play it on the ASX so you’re not spoilt for choice like you are on the TSX (Toronto exchange) or in other jurisdictions,” Miethke said.

“Alvo is run by Rob Smakman and he was part of the old Crusader team.

“He was based in Brazil, they acquired this copper VMS, not just a project, but they’ve actually got a region in Brazil that they’ve got covered.

“They’ve got some really exciting drilling intercepts, really high grade copper, zinc and precious metals as well.”

Miethke pointed out they also boast under the radar nickel targets on the Cana Brava mafic/ultramafic belt to the south of Palma.

“They’ve also got their own nickel belt to the south in their portfolio which the company doesn’t talk about much, which could potentially host a variety of different nickel sulphide targets so I think you’ve got a nice dual play there,” he said.

“People would have punted for the VMS potential and copper potential but you’ve got some nice upside from nickel as well that will probably get talked about in time.”

Alvo Minerals (ASX:ALV) share price today:

Discovery Capital Partners has provided services to Alchemy Resources and Alvo Minerals and been paid fees for these services in the past. The interviewee holds shares in ALY, ALV and 92E. The information in the article is general and opinions expressed are based on information that has not been independently verified. As such the reader should seek their own professional advice prior to making any investment decisions.

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.