Monsters of Rock: Critical minerals stocks load up on investor cash

• WA1 heads to the market for a $100 million top-up
• Critical minerals stocks are seeing love from investors as government investments place focus on sector
• Lithium miners see price target upgrades as prices rise

Monsters of Rock covers the big news in the large cap ASX mining space.

As the world’s focus sharpens on critical minerals, explorers and miners of commodities such as lithium, rare earths and more are seeing intensifying interest from investors even as prices remain in the doldrums.

We’ve already seen Liontown Resources (ASX:LTR) convert that interest and government support into investment.

A $316 million placement including $50m from Canberra’s National Reconstruction Fund – already a backer of Arafura Rare Earths (ASX:ARU) – and $50m from Chinese lithium refiner Canmax Technologies has given the Kathleen Valley lithium mine owner a $470m bulwark against shutting down the new underground operation.

Now WA1 Resources (ASX:WA1) has rattled the tin, putting its cap out for $100 million at $17 a share to fund pre-development and permitting activities at its Luni niobium project in WA’s emerging West Arunta region.

Located in remote climes on WA’s border with the NT, the project promises to be the largest high-grade niobium deposit outside CBMM’s Araxa in Brazil, which provides over 80% of the world’s supply of the steel-hardening ingredient.

Canaccord Genuity is on the placement as global coordinator, with Argonaut on board as joint lead manager and joint bookrunner, and Bell Potter in train as co-manager.

WA1 MD Paul Savich says the $1.1 billion company, down 14.75% to $16.49 after the placement was revealed to the market, received strong demand from existing and new institutional shareholders at home and abroad.

“The Luni Niobium Project is clearly an exceptional asset and this was again reflected in the strong demand recevied (sic) for the Placement from existing shareholders and new institutional investors across the world,” he said.

“Following the Placement, the Company will hold approximately A$168 million in cash, providing balance sheet strength to assist with progressing one of Ausralia’s most important critical mineral projects.

“These funds will allow us to continue to implement our strategy of committing to critical path and long-lead activities, and allow important capital expenditure in relation to various key supporting infrastructure components.”

Luni contains an indicated mineral resource estimate of 73Mt at 1.38% niobium pentoxide, with a further 150Mt at 0.8% Nb2O5 inferred.

A high-grade subset of that includes 31Mt at 2.31% Nb2O5 indicated and 22Mt at 2% Nb2O5 inferred.

Most niobium is sold as ferroniobium, a micro-alloy in high-strength, low-allow steels. Its strengthening properties means just 0.02% of niobium doping can dramatically reduce the quantum of steel needed for construction projects, dramatically reducing CO2 emissions.

Around 115,000tpa of ferroniobium is produced annually, pulling a price of around US$30,000/t. Niobium oxide, which makes up 12% of the niobium market, fetches higher prices still and is used in the defence, aerospace and medical sectors.

WA1 is not the only critical minerals stock chasing fresh capital. Lithium boom fallen star Lake Resources (ASX:LKE) is also paused for the purpose, while tungsten producer EQ Resources (ASX:EQR) announced a US$7.5m royalty funding package with private equity mob Oaktree.

It’ll grant Oaktree a 2.5% royalty on sales from its Barruecopardo mine in Spain. US$3m from a pre-payment for its Mt Carbine project has also been converted to equity by Cronimet Asia Pte Ltd.

Lithium miners all smiles

It’s been a tough run for lithium miners, who have seen prices collapse 90% from their ridiculous 2022 highs.

But cuts to mine supply in China, namely the closure of CATL’s sentiment driving Jianxiawo lepidolite mine in Jiangxi, have brought optimism back for ASX producers.

From around US$600/t in mid-June, spodumene concentrate is now nudging US$940/t, while lithium carbonate prices, around US$8000/t not long ago, are now running at US$11,400/t.

Stability would be nice, but volatility to the upside has been appreciated by investors and analysts.

The market remains in a surplus but the Jianxiawo closure could erode that and bring it into balance sooner, assuming it lasts beyond the initial three months reported.

It has local names riding the high, for this week at least.

Some analysts who are bullish on lithium are optimistic over the longer term.

Argonaut upgraded its price forecasts, driving price target uplifts across the major lithium names.

IGO (ASX:IGO) has seen its Argonaut PT rise 12% to $6.50, with higher prices lifting the prospect of Greenbushes’ owners Albemarle, Tianqi and IGO approving the distribution of dividends again later this year.

Argonaut’s price target for Pilbara Minerals (ASX:PLS) has also been lifted by 10% to $3.30.

PLS shares rose 1.16% on Friday morning to $2.18, with IGO down 0.93% to $5.32.

Liontown was up 4% to 83c, while diversified lithium and iron ore producer Mineral Resources (ASX:MIN) rose 1.5% to $36.55.

The ASX 300 Metals and Mining index rose 4.74% over the past week.

Which ASX 300 Resources stocks have impressed and depressed?

Making gains 

Coronado Global Resources (ASX:CRN) (coal) +38.6%

Pilbara Minerals (ASX:PLS) (lithium) +22.9%

Lynas (ASX:LYC) (rare earths) +18%

IGO (ASX:IGO) (lithium) +12.9%

Eating losses 

WA1 Resources (ASX:WA1) (niobium) -6.9%

Emerald Resources (ASX:EMR) (gold) -2%

Vulcan Energy Resources (ASX:VUL) (lithium) -1.1%

South32 (ASX:S32) (diversified) -1%

Coronado ran strongly higher after revealing the impact of major cost cutting initiatives in its half year accounts, despite a 1164% negative swing into a US$172.4m loss for the six months to June on the back of lower coking coal prices.

Operating costs were down US$200m, counteracting a US$400m impact from coal pricing.

PLS and IGO rose on the lithium supply chain disruptions previously discussed, while optimism on government support for rare earths continued to propel Lynas higher.

WA1 fell as it offered discounted shares in its placement, while South 32 was off slightly after flagging plans to close its Mozal aluminium smelter in Mozambique due to power prices in March next year.