SUNDAY ROAST: The ASX small caps that lit a fire under Stockhead’s experts this week

Barry FitzGerald

Copper. Its recent six-month ride has taken it from a July 2022 low of $US3.30/lb to $US3.80/lb at the close of the year, to be quoted at one stage last week at $US4.22/lb.

Barry FitzGerald says historically, the $US4/lb mark is good news for copper juniors “as it prompts investors to expand their horizon from the ever fully priced copper producers to include the more leveraged offerings in the junior ranks”.

Party time for the juniors? Not quite. Share prices have not risen in line with the copper price. Make of that what you will, but Fitz’s broker mates have been telling him inquiry levels in junior are running high.

The question that looms right now for copper watchers, however, is… what would Elon Musk do? Incredibly – or not, depending on how you view Musk’s “strategy” for life – the man who drives the transition to EVs more than anyone tweeted last week that more copper is not “required for the transition to sustainable energy”.

Copper usage in electric vehicles is about 2.5 times that of a good old fashioned petrol chariot. So high copper prices mean high EV prices.

See what Musk did there?

In his mid-December copper yarn, Barry added another two junior copper stocks to his favoured basket of four.

Since then, the winners have been Rex Minerals (ASX:RXM) up 7c to 28c, Caravel (ASX:CVV) up 5c to 24c, Lefroy (ASX:LEX) up 0.5c to 24.5c and Eagle Mountain (ASX:EM2) up 8.5c to 26.5c. Hammer Metals (ASX:HMX) is down 0.7c to 7c and Coda (ASX:COD) down 6c to 23.5c.

So with more winners than losers, not much to complain about there. And if Musk’s talking down the red metal, it’s a good bet the red metal is starting to cause him some pain.

John So

VP Capital co-founder and portfolio manager

Hard to ignore – the London Metal Exchange entered 2023 with the smallest available base metal inventory in at least 25 years.

Shortages at Chinese ports as the country moved towards a reopening have seen the nickel price to jump from $22,000 a tonne to $28,000 a tonne.

According to So, this trajectory is likely to continue. The biggest battery users in the nickel space are electric vehicles, and China’s appetite for EVs is unmatched.

So’s watching nickel companies that are either producing or under the ‘near-term’ fully ramped up producers umbrella. These companies:

IGO Ltd (ASX:IGO): A proven history of operating a very successful mine – the Nova Bollinger nickel mine. At current prices, So says the company trades on a pretty inexpensive cashflow multiple of less than 10x.

Mincor (ASX:MCR): A current small-scale producer, MCR has offtake with BHP Billiton Nick West, a subsidiary of the world’s second-biggest mining company, where some of its material is processed.

Panoramic (ASX:PAN): PAN is also producing but not quite at capacity, So says. “It needs to ramp up over the next nine months in order to get to production targets.”

Not lithium

Not all batteries are created equal.

Vanadium redox flow batteries (VRFB) are used in large scale, battery storage systems that store excess power from the grid for use during peak demand periods.

They’re considered safer, more scalable, and longer lasting than their lithium counterparts with a lifespan of more than 20 years.

The problem right now for VRFB evangelists is vanadium’s an expensive metal. And about 90% of it is produced for use in strengthening steel.

The other problem is China pretty much owns global vanadium production, and is also a large spot market, which makes things even more difficult for ASX vanadium stocks.

“While off-take agreements will not be difficult, getting the funding from China to move towards mining is another matter that would take considerable effort,” vanadium expert David Gillam told Stockhead.

“All investors want to see is new mine development outside China.”

This week, moves to address that came from Queensland, where Premier Annastacia Palaszczuk found $75 million to throw at an Australian-first critical minerals demonstration facility.

The facility was originally slated as a $10m project to process vanadium, but will now be expanded for a range of other critical minerals like cobalt and rare earth elements to be processed.

It’s a huge boon for Queensland vanadium stocks, and VRFBs have a loyal and growing squad of believers. If you want to join them, there are currently three vanadium ASX plays operating in the Sunshine State – Critical Minerals Group (ASX:CMG), Richmond Vanadium Technology (ASX:RVT) and QEM Limited (ASX:QEM).

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.