MoneyTalks is Stockhead’s regular drill down into what stocks investors are looking at right now. We’ll tap our extensive list of experts to hear what’s hot, their top picks, and what they’re looking out for.

 Today we hear from Datt Capital partner and head of research Tony Gu.


During a high inflationary environment like the one we’re in now, Gu says the Australian small cap resource space presents distinct advantages for investors looking for value and growth.

“Commodity prices often rise as a counter to the effects of rising inflation,” he says.

“During these times, we often see the production costs for many producers start to increase and for us as a fund, it’s important to be able to identify who sits on the lower end of the cost curve.”

When it comes to mining and exploration, Gu says it’s also important for investors to understand the dynamics of the industry including the different stages of the mining life cycle.

There’s potential value creation at each separate stage, he says, starting from the ‘concept phase’ when explorers acquire a prospective mineral property and begin exploring.

From there, companies aim to attract investors willing to fund exploration activities through to the discovery, feasibility and development phase, finishing off with the start-up of the mine when the project becomes operational and generates revenue.

“Different commodities have different cycles, and we want to be able to take advantage of each cycle when it happens, that is our philosophy,” Gu says.

“At the moment, we particularly like companies with exposure to critical minerals which are important for a decarbonising economy.”



Promising copper-gold opportunity

Gu’s three stock picks all sit within different stages of the Lassonde curve, a graphical representation of the lifecycle of a junior mining company from exploration to development.

First cab off the rank is Strategic Energy Resources (ASX:SER), a greenfields copper explorer still in the early-stage discovery phase.

As a current non-executive director, Gu says the fund holds a substantial interest in the company.

“SER has a rich portfolio of prospective assets and is actively exploring the undercover extensions of the world-class Mt Isa province in northwest Queensland through a joint venture with Fortescue at Canobie and at its Isa North project,” he says.

In New South Wales, SER has its Mundi and West Koonenberry projects north of Broken Hill, as well as its current focus, the Achilles 1 polymetallic prospect at the southern end of the Cobar Basin.

This project covers 287km2 of fertile stratigraphic sequences of the Cobar Supergroup and is adjacent to the undeveloped Browns Reef zinc-lead-copper volcanic massive sulphide deposit owned by Eastern Metals (ASX: EMS).

It lies along the Achilles shear zone, which hosts the prospective Achilles 2 and Achilles 3 prospects owned by Australian Gold and Copper (ASX: AGC).

AGC announced high-grade gold-silver-lead-zinc intercepts at Achilles 3 from a nine-hole reverse circulation program for 1,461m, including a best result of 5m at 16.9g/t gold, 1,473g/t silver, and 15% lead-zinc from 112m.

“Drilling returned maximum grades of 45g/t gold, more than 3,000g/t silver, and 38.8% lead-zinc,” Gu says.

“Given the strong regional potential, SER recently completed another round of capital raising, strongly supported by institutional investors including our fund.

“Proceeds from the capital raising will be used primarily to explore the Achilles 1 copper-gold prospect, previously drilled by Western Plains Gold in 2005 with peak values of 0.33% copper from 90m to 92m within a 64m zone averaging 0.10% copper from 76m to 140m, proximal to the target.

“It is an exciting time for SER to finally test this high-potential target, and we are eager to witness the upcoming drill program and its results,” Gu says.


WA1’s niobium monster makes the cut

His second pick is critical mineral rising star WA1 Resources (ASX:WA1), whose Luni discovery put WA’s West Arunta region on the map for niobium in 2022.

“Niobium supply is scarce, with only these three mines producing globally and 80% of global supply produced from the giant Araxa mine in Brazil,” Gu says.

“Niobium will play a critical role in meeting the world’s decarbonisation targets through its fundamental role in advanced specialty steels and in emerging fast-charging battery technology.”

The company unveiled a 200Mt inferred resource at 1% niobium with a high-grade subset of 53Mt at 2.1% niobium for the project last week alongside the results of a preliminary metallurgical study.

“WA1 will now focus on their feasibility study and mine design, which leads the company into the next stage of the Lassonde curve, and one step closer to production,” Gu says.


Manganese producer looking the goods

His third pick is manganese producer Jupiter Mines (ASX:JMS), owners of a 49.9% stake in the multi-decade Tshipi mine in South Africa.

“Manganese is integral to the steel-making process and we believe that steel production will remain stable given rapid urbanisation in India and other parts of Asia,” he says.

“Manganese sulphate is also a critical ingredient for NMC batteries which are used in EVs, improving battery safety and lowering the cost of cathode chemistries.

“Tshipi has been producing reliably for several years and its costs are within the lowest quartile of the global manganese cost curve, which provides resilience in periods of soft manganese pricing.”

Gu says the manganese market has experienced a significant supply dislocation with the suspension of shipping from S32’s GEMCO manganese operations which were affected by Cyclone Megan.

“It is believed that port infrastructure will take some months to be reinstated, which is significant given these operations provided around 12% of global manganese supply or over 25% of global high grade manganese ore supply,” he says.

“Chinese port stocks have since declined with manganese prices rising off a multi-year low and we anticipate that JMS may materially benefit from an improvement in manganese prices from here, along with the other corporate initiatives it has been progressing including potential battery material operation studies.”


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