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Mining
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 Canaccord Genuity senior mining analyst Tim Hoff.
Experts on the ASX investment market have noted a liquidity crunch, with spending on exploration and investing inflows falling as higher interest rates and a tense global economic environment keep investors on the sidelines.
But Canaccord Genuity senior mining analyst Tim Hoff says the mining and metals sector is defying that trend, as long as your company is making discoveries and investing in delivering exploration and production success.
He says the Diggers and Dealers Mining Forum in Kalgoorlie-Boulder has shown the resource sector in Australia is very much alive and well, and open for opportunities for the punter on the street.
“I think probably the key themes that we can see in the event is that investors are still very much interested in metals and mining, but they’re paying for discovery and they’re paying for delivery,” he said.
“You need to have your operations going, you need your discoveries happening and and you will get the attention of investors and they are willing to put at risk money for those sorts of things.
“And so I think what’s shown up this Diggers and Dealers is that there’s been a real concentration on quality and how people are performing on their projects.”
Hoff says Azure Minerals’ (ASX:AZS) is one of the big stories exciting investors, analysts and brokers around the grounds at Diggers.
Azure has risen more than 1100% this year after hitting massive pegmatite hosted lithium at its Andover project in the Pilbara.
Some analysts have said they expect drilling to date already points to an economic resource of 60-70Mt. The company formally posted an exploration target of 100-240Mt at 1-1.5% Li2O on Monday, something that could be, MD Tony Rovira told delegates at Diggers and Dealers yesterday, as good as a top 5 hard rock lithium resource globally.
Hoff said the response to Azure shows the market will still reward Tier 1 discoveries.
“Looking at it and the connection between results and where people interpret value, that gap has closed. It’s happening very quickly these days,” he said.
Thematically Hoff also sees nickel as an intriguing market, with big investors from outside China needing to get into the space as it emerges as a battery and electric vehicle ingredient.
“There’s a lot of potential in nickel. I think we’ve got to see more investment from parties that haven’t been in the market for a long time,” he said.
“So the Japanese, the Koreans, I think we’ll see more and more investment flowing down from those because (top producer) Indonesia is still a hot topic.
“I don’t think everyone’s sold that they can solve all the nickel problems and even if they can, whether you can use them in your batteries is going to be the next critical question.
“I think nickel is interesting and I think people are genuinely looking out for copper plays that are either genuine exploration successes or operating well and that’s hard to find in this market.”
We’ve already touched on $1 billion capped Azure, one of (the) Hoff’s favourite stocks from the Diggers talkfest which he described as “something fairly special”, but he has a couple other companies worth a look as well.
Gascoyne was a disappointment for a long time, struggling to make anything work at its Dalgaranga gold mine near Mt Magnet.
But a hard reset could be the tonic the ailing asset needed. New management led by former Northern Star geo Simon Lawson shut the operation to focus on a new high grade discovery called Never Never.
It now contains 3.83Mt at 5.85g/t gold for 721,200oz.
“I’m not a gold analyst, but I’ve been singing the praises of Gascoyne during the conference, I think that that discovery of the Never Never is something that’s unique and interesting,” Hoff said.
“Where we see a lot of one gram per tonnes, all of a sudden we’re seeing five grams per tonne. So I think that’s fairly significant.”
Gascoyne is up 113% YTD and has a market cap of $206m.
Hoff also likes the look of WA1 Resources, which is on the trail of a high grade niobium discovery on the WA side of the NT border in the West Arunta region of the mining state.
It could provide diversity of supply in a market dominated by a single mine in Brazil. Niobium is used widely but in small quantities in high-strength steels and superalloys for jet engines and rockets.
“The grades stand out as a class of their own and the grades and scale is sort of two important factors, but it’s very much unknown in the market,” he said. “Grades and tonnes, on that basis alone it’s starting to shape up as a significant resource.”
Hoff is also keeping an eye on neighbour Encounter Resources (ASX:ENR), which has hit some niobium results on its own tenements but is yet to pull the excitement around WA1, up 4500% in the past year and still with a market cap of just $220m.
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