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Resources Rising Stars: 4 ASX explorers give us a read on the market’s pulse
Mining
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- Miners are well positioned to perform during market volatility
- Inflation is a great risk but investors seek hard assets during times like these
- Four ASX explorers provide their view on how market sentiment has changed over the years
Inflation and rising interest rates are two words on everyone’s lips right now, but as Lion Selection Group investment manager Hedley Widdup told the Resources Rising Stars Conference last week, miners are well positioned to be the best performers through a period of market volatility.
While inflation does pose one of the greatest risks, there is a positive flip side – “miners make commodities which are hard assets often favoured by investors fleeing inflation,” Whiddup said.
With that in mind, Stockhead sat down with four explorers exposed to four different commodities – lithium, gold, copper, and uranium to get a first-hand account into market sentiment and how it has changed over the years.
Liontown Resources (ASX:LTR) – Managing director Tony Ottavino
Market cap: $2.3b
Commodity: lithium
Location: WA
What is market sentiment like now compared to five years ago?
“The market for lithium has matured and is still maturing – we are getting much better price transparency compared to five years ago.
“The industry is starting to understand how a commodity like lithium should be marketed and should be priced – in the early days, it was just a speciality chemical, but lithium is becoming a mainstream commodity, like copper for instance.”
How long do you think this will last?
“You can’t look at these things month by month, it is a long term proposition.
“There will be cycles, we’ve had astronomical growth in prices – hydroxide is over US$80,000/t when I joined the company a year ago it was sitting at US$15,000/t – we’ve seen this huge acceleration.
“There will be moderation, but I look at the long-term fundamentals, it is clear the EV movement is here and it is not going anyway. It will become stronger and stronger.”
Immediate plans?
“Immediate plans now is to conclude the off-take, conclude the funding, and kick off construction in July.”
Gateway Mining (ASX:GML) – Managing director Mark Cossom
Market cap: $20.3m
Commodity: gold
Location: WA
What is market sentiment like now compared to five years ago?
“At the moment market sentiment is about the new wave of future technology metals – there is a lot of interest in battery metals and critical minerals such as rare earths, which has taken the interest of investors.
“But longer term, the Australian investor base does understand traditional commodities such as gold – however, right now there is definitely a lot more interest in the potential of these new metals and what demand may look like in the future.
“A couple of years ago there was a lot of investor interest in gold, there was a mini rush for junior gold explorers towards the end of 2020.
“At the time, there was a lot of hype in the sector on what the gold price might do but since then the price has stabilised, which is great for the producers, but it has meant that the speculative type of investor has shifted elsewhere looking for other potential future gains – that is the industry, market sentiment goes in cycles.”
How long do you think this will last?
“I think there is a lot of interest because the potential is unknown, and as that starts to crystallise a bit more, then it will start to settle down.”
Immediate plans?
“We are speeding up our work programs, shareholders want to see us get on with executing our strategy, which is increasing our resource at Gidgee.
“Even though the sentiment isn’t amazing for junior gold explorers, we have the money in the bank and a good project, so we are getting on with the job and drilling.
We are taking the view that if we do the work that we have told our shareholders we are going to do, then the rest will take care of itself.”
DevEx (ASX:DEV) – Managing director Brendan Bradley
Market cap: $91m
Commodity: uranium
Location: Northern Territory
What is investor sentiment like now compared to five years ago?
“The uranium market is a lot stronger now, it has been in the doldrums for a very long time over the last 12 years.
“The price fell to the $20 a pound mark but over the last 6 to 12 months it has picked back up to $50 a pound on SPOT and there is a lot of positive sentiment around the price right now.
“People are using buzzwords like ‘decarbonisation’ and ‘energy crisis’ – whether it is decarbonisation or European markets looking for baseload power which isn’t reliant on countries like Russia – uranium offers that key baseload power solution.
How long do you think this will last?
“The uranium market will increase quite significantly over the next few years – Europe uses reactors, America uses reactors – it is a reliable energy source that isn’t about burning and combustion and coal.
“From a competitive point of view globally, everyone needs to secure their energy supplies for the next hundred years – the sun is a great opportunity, as is wind, but you need that baseload power.”
Why should investors consider your company?
“It is a little like the lithium boom, suddenly everyone has realised that lithium is a very essential product for batteries but with uranium it is an essential product for providing energy.
“Why DevEx is important is because we are one of the few companies exploring for uranium in Australia, we have high-grade uranium projects around the existing Nabarlek Uranium Mine, which was historically mined in the 1980s.
“There are only about three ASX listed companies, including us, that are exploring for uranium in Australia – and only two companies that I know about that are drilling this year for high-grade uranium in Australia – Vimy (our neighbours) and us.
“From my point of view, if investors want exposure to the high-grade uranium market in Australia, DevEx is a great exploration company to look at.”
Immediate plans?
“Drill holes, lots and lots of drill holes. We will be drilling at Nabarlek – the first rig arrives at the end of June and then we have another rig arriving in July.
“We have also recently announced a gold discovery down at our Junee Project in NSW, we will be drilling there as well and then at Sovereign where we are exploring for nickel, copper, PGE north of Chalice (ASX:CHN) we will get back in there to do more drilling there too.
New World Resources (ASX:NWC)– Managing director Mike Haynes
Market cap: $56m
Commodity: copper
Location: Arizona, US
What is investor sentiment like now compared to five years ago?
“From a base metal perspective the market sentiment is a lot stronger now than it was five years ago and that is largely because base metal prices are a lot higher.
“Five years ago, if you were in gold that was all people wanted to invest in. Even now though, yes we are involved in copper and we have a high copper environment but copper share prices haven’t been reflecting that high commodity price, there is still a disconnect there between commodity prices and share prices.”
How long do you think this will last?
“With concerns around inflation, I think it will be reasonably short-lived.
“I am optimistic that things will turn around quickly but there are a couple of fundamental economic situations that are out of our control in terms of broader attitudes towards the market, which is making people wary.
“The market will increasingly value base metal companies higher and higher in the very near term and in the medium term through to 2030, there is going to be a supply deficit in the copper market and beyond 2030, as that supply deficit increases more and more people will invest in copper.”
Immediate plans?
“We currently have three rigs drilling so we will continue to explore to expand our resource base at the Antler copper deposit then in the coming weeks we will put out our initial mining study that I think will underpin the value of our company.
“As we continue to have exploration success, then I think the mining proposition should become more and more valuable.”
