Niv Dagan

PEAK Asset Management

Niv Dagan is hot on uranium at the moment. He says discussions with key figures in the yellowcake market had convinced him the current run in uranium prices was more concrete than previous escalators to nowhere.

“We spoke to an exec director (recently) that actually is a major shareholder in NexGen Energy (ASX:NXG) from five cents a share and NexGen is (now) above $8 per share,” Dagan said.

“The relation between spot and forward is there. And what we’re actually seeing is long term contract prices starting to reflect that spot price and that hasn’t happened in the last 10 years, since Fukushima.

“We’re seeing a lot of supply disruptions with what’s happened with Cameco, the move to zero carbon emissions, obviously Ukraine and Russia and supply coming out of Kazakhstan.

“So we believe that uranium could surpass US$100/lb over the next few months.”

“Here in Australia, you’ve seen stocks like Boss Energy (ASX:BOE) , Bannerman Energy (ASX:BMN), we caught up with the CEO of Elevate Uranium (ASX:EL8) just last week, and he’s really, really bullish on the sector,” he said.

But Peak is also top shareholder of junior Terra Uranium (ASX:T92), a play a bit lower down the food chain where Dagan sees plenty of value.

It is down 60% year to date after launching an ASX IPO last year, but holds the HawkRock, Pasfield Lake and Parker Lake projects in Saskatchewan’s Athabasca Basin, a region famed for hosting the world’s largest and highest grade uranium deposits.

Dagan also likes the look of Odessa Minerals (ASX:ODE), a former diamond explorer which has shifted focus to the Gascoyne region of WA where Delta Lithium’s (ASX:DLI) Yinnetharra discovery has pulled multiple explorers into the new lithium hotspot.

“They’ve identified 56,000m (strike length) of pegmatites, have got rock chips in the lab sampling and the whole Gascoyne region is starting to get a little bit of activity,” Dagan said.

Dagan said the Gascoyne could follow other regions like the Pilbara in becoming a hotspot for spodumene discoveries, with the mature Pilbara still throwing up new finds in the past year including Azure Minerals’ (ASX:AZS) massive Andover.


John Mills

Morningstar Equity Analyst

John Mills reckons Whitehaven Coal (ASX:WHC) has legs at the moment.

Whitehaven is a large Australian independent thermal and semisoft metallurgical coal miner with several mines in the Gunnedah Basin, New South Wales.

It also owns the large Vickery and Winchester South deposits in New South Wales and Queensland, respectively. Coal is railed to ports in Newcastle for export to Asian customers.

“The Maules Creek and Narrabri mines should be the key driver of an expansion in Whitehaven’s share of salable coal production to approach 19 million metric tons from fiscal 2028, from about 14 million metric tons in fiscal 2021,” Mills says.

“Development of the Vickery deposit could see around 7 million metric tons of additional equity production, with first output likely in our view from around 2025.

“Whitehaven is still benefiting from above-average thermal coal prices. Cash flows are strong with excess cash likely to be returned to shareholders via dividends and share repurchases,” Mills adds. The company is also considering growth options.

“While down on historical highs reached in 2022, thermal coal prices remain elevated as the Russia Ukraine war reinforces the importance of energy security.

“The company is generating torrents of cash and with a very strong balance sheet, is returning much of its excess cash to shareholders via fully franked dividends and buybacks, though it recently paused its buybacks while it considers growth options including bidding for two coal mines BHP is selling.

“Our updated fair value estimates for Whitehaven also reflect a weaker AUD/USD exchange rate. The decline in currencies versus the US dollar provides a modest tailwind.

“We think it is undervalued due to many investors preferring to avoid investing in coal. It is well-placed to benefit from continued strong demand for high-quality thermal coal over at least the next decade.”

Mills also likes the look of Newcrest Mining (ASX:NCM) at the moment. It’s an Australia-based gold and, to a lesser extent, copper miner. Operations are mainly in Australia and Papua New Guinea.

The company also owns a 32% stake in the Fruta Del Norte gold mine in Ecuador, while the acquisition of Brucejack in 2022 adds to its 70% stake in the Red Chris mine in Canada.

“The company is likely to produce around 2 million ounces of gold per year over the next decade, making it one of the larger global gold producers but still only accounting for less than 2% of total supply.”

Cash costs are below the industry average, underpinned by improvements at Lihir and Cadia. Organic growth options include its Havieron prospect, the Red Chris underground mine, and the high-grade Wafi-Golpu copper-gold prospect in PNG.

“Newcrest Mining is engaged in exploration, mine development, mine operations and sale of gold and copper concentrate. It has operations in Australia and Papua New Guinea, with smaller mines in Indonesia and Cote d’Ivoire.”

Moving over to base metals and Mills says South32 (ASX:S32) strategy is to transition its portfolio to metals such as aluminium, alumina, copper, and zinc that are more likely to benefit from decarbonisation and electrification.

“As such, while elevated metallurgical coal prices saw the division comprise around one-third of fiscal 2023 EBITDA, we forecast metallurgical coal to be less than 10% of EBITDA at the end of our forecast period in fiscal 2028,” Mills said.

“A 2023 result that was weaker than expectations and concerns over lower near-term commodity prices drive its 20% discount to fair value in our view.

“Its major operations include alumina businesses in Australia and Brazil, aluminium in Brazil, South Africa, and Mozambique, manganese businesses in Australia and South Africa, and New South Wales metallurgical coal.”

It also owns the Cannington silver/lead/zinc mine in northwest Queensland and the Cerro Matoso nickel mine in Colombia.

“The Cannington silver mine and manganese operations deliver high returns, but have relatively short reserve life,” Mills said.

“Along with a 2023 result that was lower than expected and lower near-term prices for the company’s other commodities (such as aluminium, manganese, nickel, zinc and copper), we think it is undervalued. It also has a strong balance sheet.”


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