SUNDAY ROAST: The ASX small caps that lit a fire under Stockhead’s experts this week
Copper has started to move.
Good news for readers of this column who no doubt jumped on the bandwagon last month when Barry FitzGerald picked out four junior ASX copper plays positioned well for the expected boom in the red metal in, er… 2025.
Broadly, those who know such things say “2025” because that’s when global supply is projected to dry up just as the electrification boom really starts to take hold.
But here we are and copper’s at US$3.82lb after hitting a low of US$3.30/lb earlier this year.
Keep in mind both of those milestones coincide with interest rates rising and potentially cooling. Regardless, Garimpeiro’s hearing “lots of chatter that the timing of the take-off in copper prices might need to be brought forward”.
Time to add a couple of names to his list of four juniors Rex Minerals (ASX:RXM), Hammer Metals (ASX:HMX), Caravel Minerals (ASX:CVV) and Coda (ASX:COD). Since November 25, they’ve returned a mixed bag (two winners, two losers), but a net gain of 17.8%.
Looking for more up-and-coming value, Fitz is adding Lefroy (ASX:LEX), trading at 24c for a market cap of $36 million. It’s been sitting on an intriguing discovery called Burns long enough for it to become unfashionable. But LEX still reckons it’s onto “a big Archean-aged porphyry system”, which Garimpeiro assures us would be a first for Australia.
We’ll know soon. Lefroy’s now completed an 80-hole drill-out program, and will have a maiden resource estimate for the central part of the 2.5km long system out in the March quarter.
And Eagle Mountain (ASX:EM2) is trading at 16c for a market cap of $45m. That’s a massive tumble from its 2022 high of 70c. But it’s now been upgraded twice for 240,000t of copper at Oracle Ridge in Arizona (mining friendly) and just pulled another $5m in a cap raise for further exploration.
And because Oracle Ridge is a past producer, EM2 is already starting from an underground position. It’s pure exploration from here.
Fun fact: Lunar New Year is the biggest annual human migration on Earth. Just something to keep in mind over the next couple of months if you’re hoping for an early exit for China from Xi Jinping’s Zero Covid Tolerance lockdowns.
It’s certainly on James Whelan’s mind, and he’s holding off buying for a bit yet.
BUT… maybe you’re the type who turns up to airports three hours early, even if it means you’ll spend two hours on the floor waiting for check-ins to open. So if you’re determined to not miss the China reopening wave, but only looking for a sensible hedge or three, Whelan’s picked out some of his favourite ETFs.
For the record, China’s surging… but still well behind curve on the MSCI All-Country World Index. You might read that, as Whelan does, as still showing “relative value to the rest of the world”.
“With that in mind,” he says, “the three ways to get access to China stocks are”:
CNEW: VanEck China New Economy ETF. Directly invest in China companies listed in China. Expensive (because China) but the sort of Food & Beverage names you’d want in a China consumption society. And it’s listed on the ASX.
CNYA: iShares MSCI China A ETF. Direct China access but cheaper and weighted more towards Financials. Trading at ~15x 2022 earnings and a P/B below 2x. Listed on the LSE or in New York.
And KWEB: Kraneshares CSI China Internet ETF. Access to the big Chinese Internet companies – Tencent, Alibaba, JD. Listed in New York or Hong Kong, so currency hedging is an issue.
And finally, a quick hit from Guy Le Page, noted gold, cigar and champagne fancier. Le Page also fancies the view of Gareth Soloway, co-founder and president of Verified Investing Education, who is calling gold up from US$1,800 to US$2,070/ounce.
Time to find some deep effing value, as the kids on the dodgy forums say. Eyes on West Africa then, where gold has particularly been smashed the past couple of years.
Promising intersections and drill results are starting to flow – perhaps not entirely coincident with rising gold sentiment – and a maiden resource early to mid-2023 should come with a re-rating of the company.
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.