Kalgoorlie's gold plated streets play host to the Diggers and Dealers forum next week. Pic: Getty Images
Mining
If analysts are wont to play a straight bat, Tim Hoff’s Bazball-style slogs from last year’s Diggers and Dealers Mining Forum in Kalgoorlie may blow your mind.
When we spoke to the Canaccord Genuity number-cruncher on the final day of last year’s conference he put in what can only be described as a virtuoso performance, the equivalent of striking a 180 in a darts hall then beating Bob Hawke’s yard glass skol in a single breath.
His picks, you may recall, included Azure Minerals (ASX:AZS) just days before an M&A war broke out that turned into a $1.7bn sale to SQM and Hancock Prospecting, WA1 Resources (ASX:WA1) in the early throes of enthusiasm about the potential of its Luni niobium discovery in WA’s West Arunta province, and billion-dollar capped gold darling Spartan Resources (ASX:SPR) when it was sitting on a market cap of just ~$200m.
Invest $10,000 equally in Hoff’s 2023 picks and sell into the Azure takeover, and you’d be sitting on $21,700 right now, the biggest gain among them the 439% for Spartan, then known as Gascoyne Resources and almost a year out from the revelation that it had doubled the scale of its high-grade Never Never discovery.
“The headline should read Tim Hoff was keen to hang up the boots and finish on a high,” Hoff joked.
“I do like to send that article to a few people whenever they’re talking about it internally, saying if only there was someone that had thought about all these names a while ago.”
Hoff is clear-eyed that the market is very different this time around and it will be harder to match those exploits. He believes a thinner investor list at the still heaving Goldfields gabfest, historically the Australian mining sector’s biggest do, is reflective of a bottom of the cycle mood as money men rotate out of commodities and into tech.
With that in mind, gains are less likely to be crystallised as fast, with investors better served taking a long-term strategy.
“It’s a very different market this time around, isn’t it? Lithium was already coming off (last year) so we that had already kind of transpired,” he said.
“Now we’ve got lithium in the dumps, you’ve got nickel in the dumps, gold is kicking along well, and then sort of niche commodities, but even look at uranium, it’s fallen over. Copper’s pulled back from its highs.
“It’s a really mixed market in terms of sentiment, which is all over the place. Nothing’s really holding other than gold, I would say right now.”
One of the big indicators of the bottoming out in resources sentiment for Hoff is in the Bloomberg Commodities Index.
It’s currently trading around a 3.5 year low with iron ore, coal and oil off their post-pandemic and Ukraine invasion highs, nickel trading at ~US$15,800/t and other base metals outside of copper in relatively rough shape.
“If you saw the investor list that was attending Diggers this year, I’d say it’s probably one of the smallest years from an investor point of view,” Hoff said.
That’s not the most positive outlook for now. But it does suggest we are closer to the next cycle.
“You’ll see lots of investors there in bull markets, and you see not too many in bear markets and that’s where you find the biggest value points,” Hoff said.
In a true ‘return to form’, Hoff thinks the gold space, where prices are currently around all time highs, will take the focus it ceded to battery metals back on the Goldfields Arts Centre stage in 2024.
Rare earths, despite weak prices, are also set to be well represented.
“I think probably rare earths is going to be a continuing theme over the near term and I think there’s a good showing there by the rare earths players,” Hoff said.
The biggest M&A attention is likely to circle one of Hoff’s previous picks, Spartan. Its Never Never discovery near Mt Magnet in WA, which is located just a stone’s throw from a mothballed 2.5Mtpa processing plant, now contains 1.49Moz at over 8g/t. That marks it as one of the largest high grade gold discoveries in the Australian gold scene over the past five years.
Cashed-up Ramelius Resources (ASX:RMS) has a seat at the table after spending $180m acquiring an 18% stake, but the cat and mouse game is well and truly on with RMS boss Mark Zeptner (in the rich vein of BHP CEO Mike Henry’s OZ Minerals stategy c. 2023) calling Spartan a ‘want not a need’ and SPR head honcho Simon Lawson saying it’s now too expensive for would be suitors.
“It will be interesting to see whether the grade and the potential scale of that operation becomes too tempting to ignore. All these companies talk about assets that will improve their portfolio. Well, here you are guys,” Hoff said.
The Diggers and Dealers Awards are always closely watched as a barometer of the industry pulse in the past year.
Including prizes such as the best emerging company (often a poisoned chalice), digger and dealer of the year and the GJ Stokes memorial prize for lifetime contribution to the mining industry, the awards handed out at the Diggers closing gala dinner are the closest thing to the Oscars for the Aussie mining game.
Hoff thinks Digger is an open race, while for Dealer it seems hard to go past Azure Minerals and its undeniably patient boss Tony Rovira. The $1.7bn sale to SQM and Hancock for the massive Andover lithium discovery saw the explorer’s investors exit with stunning timing as the lithium price came off the boil.
WA1 looks like a shoe-in to Hoff for best emerging company.
At 200Mt at 1% Nb2O5, WA1 recently announced the largest niobium discovery in 70 years and it remains Hoff’s highest conviction pick.
While niobium is certainly regarded as niche, he cautions that in tonnages it is a bigger market than uranium and, when uranium prices were down in the dumps a few years ago, was actually a more valuable one as well.
He’s keen to keep tabs throughout proceedings on the reception given to WA1 and its followers in the West Arunta, notably Encounter Resources (ASX:ENR), Australian Potash (ASX:APC) and Rincon Resources (ASX:RCR).
“I still think Encounter is going to be a story that we should watch closely,” Hoff said. “I think probably the West Arunta is going to be an entire district.
“We already know WA1 has hit, and I’ve probably put them as my highest conviction pick … but we’re watching Encounter’s results really closely to see if this could be a district scale opportunity.”
Among the gold and silver names Hoff says he’s looking forward to checking in on the progress of a number of under the radar small caps, including northern Goldfields explorer Brightstar Resources (ASX:BTR), Chilean silver hunter Andean Silver (ASX:ASL) and NZ goldie Santana Minerals (ASX:SMI).
Brazilian rare earths stocks Meteoric Resources (ASX:MEI) – a 2023 bolter which has hit a little turbulence on the market as it moves toward the development phase of the Lassonde Curve – and Gina Rinehart backed Brazilian Rare Earths (ASX:BRE) are among those rare earths names Hoff remains keen to watch.
He says Canaccord continues to place a big focus generally on the Brazil rare earths space, where a number of explorers now boast deposits with grades comparable to ionic clay adsorption mines in China.
There’s also the junior copper space, where prices above US$9000/t and predictions of even higher levels once deficits emerge in the years to come, have investors’ interests piqued.
It’s tough to find value at the junior end of the copper market, Hoff noted, but there are a number of stocks on his catch-up list.
They include Zambian copper hopeful Prospect Resources (ASX:PSC), newly Glencore-backed Nifty mine owner Cyprium Metals (ASX:CYM), Queensland juniors Hammer Metals (ASX:HMX) and Carnaby Resources (ASX:CNB) and Steve Parsons-led Newfoundland copper developer FireFly Metals (ASX:FFM) .
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