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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 Alto Capital investment manager Tony Locantro.
With the implosion of battery metals prices last year, high interest rates and uncertain demand from China, investors are more shy about punting on junior resources stocks than they have been in years.
In over 25 years advising on resources stocks, Alto Capital investment manager Tony Locantro says he has never seen valuations as low as they are at the moment.
“We have a lot of gold companies with gold in the ground,” he said.
“Normally, enterprise values were $30-40 an ounce, sometimes now they’re $10-20. The gold stocks are dirt cheap. There’s no real interest in funding high risk-high reward exploration at the moment outside of really the lithium sector.
“So we’ve had we’ve had a two speed spec market. We’ve had lithium and rare earths on a tear, gold, copper, silver and base metals absolutely poleaxed for the last two years.”
As far as Locantro is concerned, the lithium stock bubble has ‘well and truly burst’.
Lithium concentrate prices have fallen from over US$8000/t early last year to US$850/t today at spot rates.
“These announcements on lithium don’t generate the dopamine hit that they did previously,” Locantro says.
“I think a lot of the lithium companies now coming out with announcements, it’s like turning up to a piss up at 3am and you get offered a vegan pizza, no one wants it.”
Instead, Locantro sees the market’s eyes shifting to previously unloved commodities like gold and copper.
“I think the money’s going to move towards gold,” he said.
“I think gold exploration, gold M&A, and it doesn’t matter what commodity you find, if you have a big discovery you’re going to get rerated.
“And I think for a lot of these stocks to start to see some interest, we need greed, we need people to talk about their wins, we need a positive attitude.
“And that will take time, but it only takes one big announcement and it’s game on and that’s what I’ve seen over over my career.”
Locantro was at the RIU Explorers Conference in Fremantle this week, where he said a number of explorers on show were looking heavily underrated right now.
Locantro rates Red Metal as his ‘stock of the year’.
“I’d call it the multivitamin of junior exploration companies, it’s just got everything going for it,” he said.
“They do have a rare earths discovery near Mt Isa, which looks fantastic and the metallurgy has come in, size isn’t a problem.
“And they also own 52% of Maronan Metals (ASX:MMA), which I believe is one of the best undeveloped silver-lead resources in the country.
Locantro disclosed him and his clients are strongly represented on the Red Metal register.
“And it’s run by professionals, Rob Rutherford has kept a tight structure, he’s always said he wants a small company with a big share price so for me, we are as full as a State School in Red Metal.”
Unrelated to Locantro’s work, he sees plenty of potential in WA gold explorer Alto Metals, which has cultivated a 1.05Moz bounty of gold around the historic but underexplored gold field of Sandstone.
“I don’t think the market’s appreciating the gold resources that (MD) Matt Bowles and the team are building. We do have some other companies in that region,” he said.
“The other one active there’s Aurumin (ASX:AUN), we have companies such as Westgold (ASX:WGX) around so I do think that at some point, the Sandstone region might start to come to some sort of prominence.
“For a lot of the major companies going out and buying ounces is a lot cheaper than drilling and going through the process of putting something into production.
“So I think we’re going to see another surge in M&A, especially in the junior gold sector. Alto Metals looks one to look at.”
Uranium prices are sitting at over US$100/lb for the first time since the last boom in 2005-2006, a moment of rapid upward stock movements in yellowcake Locantro says was only rivalled by the Dot Com boom of the late 1990s.
He likes Athabasca Basin explorer Basin Energy.
“I did do a little bit around the IPO,” he said.
“Pete Morehouse, ex-Alligator Energy seems to be mobilising for a big drilling campaign and some of the biggest uranium mines are in that Athabasca region of Canada.
“I think the punters are going to be keen for uranium after they lick their wounds from from the lithium sector.”
Another commodity Locantro says is ripe to see rerates is the copper sector.
“For all the hype around copper, the Australian copper juniors just see no love, share prices have capitulated,” he said.
There are a couple of sold off copper juniors on the Alto radar.
“There is a junior here called Stavely Minerals, which I’m very interested in based on the fact that they made the Cayley Lode discovery in 2019,” Locantro said.
“Shares ran to about $1.30. Now they’re trading at 3.3-3.4 cents and I think there’s been that much pressure on the company, the market knows that cash is low in a lot of these juniors and I think here is a chance for (MD) Chris Cairns maybe to come out and say well, ‘wait a minute, we’re still focused on the Cayley Lode and those large copper projects’.
“He’s also making a lot of noise around Hawkstone, which is nickel. But as I mentioned earlier, it doesn’t matter what commodity you find, if you make a big discovery, the market will rerate you.”
The other is Arizona focused Eagle Mountain Mining, which is running a new scoping study on its Oracle Ridge project in Arizona, where it boasts a resource of 28Mt at 1.35% copper, 11.06g/t silver and 0.16g/t gold.
“Another dollar $1.30 to 6c stock, backed by Charlie Bass, it’s got a good resource in Arizona,” Locantro said.
“They’re looking at low cost, environmentally friendly copper production. And I think the copper cycle upswing could be perfect for Eagle Mountain Mining.
“They are doing a rights issue at present at six cents with an option. So that’s another one I think that you can look at from a contrarian viewpoint.”
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.
At Stockhead we tell it like it is. While Red Metal, Maronan Metals, Basin Energy and Eagle Mountain Mining were Stockhead advertisers at the time of writing, they did not sponsor this article.
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