SUNDAY ROAST: The stocks that lit a fire under our experts this week
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Guy le Page has gone all nerd rock on us this week with a nearology play piggybacking $526m moonshot WA1 Resources, and something about “carbonatites” and IOCGs.
That’s okay though, because our Guy’s a former geologist, so we can… trust him?
The area is the West Arunta in WA, where WA1 made a lot of punters suddenly wealthy on the back of what looks like to be a very high-grade niobium resource.
Rio Tinto’s at the party too, having spent $58m to the southwest on WA1’s adjoining tenements as part of its JV with Tali.
Both are not exactly entry-level stocks (although WA1 was, 12 months ago). But just over a week ago, CGN Resources (ASX:CGR – 25c, $22m MC) listed on the ASX and is currently trading at just over 20c a share for a $20m market cap. And its 948 sq km tenement adjoins both those mentioned above.
Guy is particularly taken with CGN’s key prospects ‘Tantor’ and ‘Surus’. Both are gravity and/or magnetic anomalies but all you need to know about that is they’re similar in rock-talk to WA1’s Luni find.
And “the drills are reaching target depth on the first diamond hole”, says Guy.
There’s more from him on all that, here.
One of the biggest mine deals of the year went through recently, and quietly.
Fortunately, Garimpeiro doesn’t miss much, because Glencore’s sale of its CSA copper mine near Cobar for $1.73 billion – yes, with a ‘b’ – deserves a second and third look.
It was bought by the US listed Metals Acquisition Ltd (MAC), which gets a mine producing 40,000t of copper annually from a high-grade orebody. “An expensive deal any way it is cut,” Fitz notes.
But if you care to “zoom out”, as the kids say, it’s music to the ears of believers in the copper thematic. And just maybe to the ears of Aurelia Metals (ASX:AMI – 9.5c, $160m MC) holders.
It just happens to be a Cobar producer, and its assets are ex-Glencore. Yes, they’re more weighted to gold, but Fitz notes “base metals to become more important over time”.
“With a new mine development underway, and a strategy to ‘fill’’ its two under-capacity treatment plants in the Cobar region, it too could be a 40,000tpa producer, at least on a copper equivalent basis,” he says.
It’s enough to get some industry watchers running “comps” between Aurelia and what MAC paid for CSA. Mike Evans, executive director of Acova Capital, is pondering “a fundamentally large valuation gap here”.
Macquarie is keeping mum on market cap comparisons, but has a 12-month price on the stock of 21c. A good starting point at more than double AMI’s 9.5c late last week.
China’s got graphite exports in its sights now; specifically, putting the clamps on them. Which isn’t great news if you’re making lithium batteries outside of China.
But it generally means graphite customers in Europe, North America, and elsewhere in Asia are likely to work towards instigating an ‘ABC’ policy (Anything But China).
If you want to get in on that action at ground level, capital markets veteran, resources analyst, metallurgist and geologist Peter Strachan has been looking at ASX graphite plays starting to make some waves.
The cheapest he’s noted is former uranium focused Kingsland Minerals (ASX:KNG – 26c, $12.8m MC). And Pete (metallurgist) thinks it has a project in the NT that will be “a metallurgist’s dream”.
Not only is it proving up a potential 200-250Mt grading 8% to 11% total graphitic carbon, it also co-hosts “significant levels of gallium”.
Gallium currently trades for US$276/kg and is used in semiconductors and “all manner of electronic equipment,” Strachan notes.
“And its major supplier is, you guessed it, China!”
An updated drilling and initial Resource estimate is due any minute, ahead of the wet season and as the year draws to a close.
If you like that, Peter also has a bunch more ASX graphite candidates here.
BUY Abacus (ASX:ABG, 99c, 890m MC). Its portfolio has historically been split between storage (strong tailwinds) and office (headwinds).
Over the past five years though, Abacus has made major storage acquisitions and developments, with more expected in the future. It has also retained a 20% stake in the spun-off group Abacus Storage King (ASX:ASK), with a $3 billion self-storage portfolio across 131 assets.
On the office side, Morningstar sees a positive in the fact rents are finally off their pandemic lows, and Abacus’ rents are below the market average anyway.
Three-quarters of Abacus’ office portfolio is A-grade, mostly in inner city locations in Sydney, Melbourne or Brisbane.
It’s put a fair value of $1.75 on the stock, versus current price of 99c. That’s actually an 8% downgrade, but the company’s FY24 guidance includes a dividend distribution of 8.5c per share, which puts the REIT on forward yield of 7.2%.
“That’s not bad, considering our outlook,” says Morningstar.
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.