Something for everyone in Argonaut’s list of top ASX development projects

Argonaut has delivered its 2024 list of best undeveloped mining projects on the ASX
Gold projects dominated followed by uranium, rare earths, and copper
Five projects based in Africa got a mention, as did another six in WA

The 2024 edition of Argonaut’s Best Undeveloped Projects list shows that the health of the mining project pipeline is improving.

The 11^th edition of the report featured 18 projects, the highest number since the annual analysis began.

It’s a far cry from 2019, where the cupboard was almost bare. Argonaut has always aimed to include 10-12 projects in the list but that year, only seven worthy projects were featured as the mining industry continued to recover from underinvestment and a discovery drought following the 2015-16 bust.

The selection criteria for the list is ASX-listed companies with a market capitalisation of less than $5 billion holding development-stage projects with an internal rate of return exceeding 25% that can be profitable through all price cycles, and have a high likelihood of achieving a plus-$100 million project valuation within two years.

“We allow for some flexibility with criteria, particularly IRR if assessing a long-life project,” Argonaut said.

The firm’s ‘bottom-up’ approach is generally management agnostic, though some commodity and jurisdictional filters are applied where the risk is deemed unacceptable.

Argonaut stressed it focused on project quality and not current corporate valuation.

“The key criteria for BUPs projects are low cost, high margin assets with the capability to maintain strong financial returns through the commodity price cycle,” analysts said.

“The quality of such projects enables a broader range of financing options and underpins likely development as well as increasing M&A appeal.

“We introduce some price cycle flexibility for commodities emerging due to the decarbonisation shift. Some leeway is given on criteria depending on discount rate and potential project mine life.”

Diverse list

This year’s list spans 10 countries and 10 different commodities.

Gold dominated the list with six projects, followed by uranium, rare earths and copper with two.

The list also included a palladium-nickel project (Chalice Mining (ASX:CHN)’s Julimar), a pure-play nickel project (Centaurus Metals (ASX:CTM) ’ Jaguar), a zinc-copper project (Develop Global (ASX:DVP) Woodlawn), a niobium project (WA1 Resources (ASX:WA1) Luni), a rutile-graphite project (Sovereign Metals (ASX:SVM) Kasiya) and even a lithium project (Patriot Battery Metals (ASX:PMT) Shaakichiuwaanaan).

Six of the projects are in Western Australia, with one in New South Wales, while three are in Canada, two are in Brazil and one is in the US.

Africa contributed five projects – West African Resources (ASX:WAF) Kiaka in Burkina Faso, Predictive Discovery (ASX:PDI) Bankan in Guinea, Perseus Mining (ASX:PRU) Nyanzaga in Tanzania, Sovereign’s Kasiya in Malawi and Aura Energy (ASX:AEE) Tiris in Mauritiania.

Argonaut listed jurisdiction risk as high for Guinea, Burkina Faso and Mauritana, and moderate for Tanzania, Malawi and NSW.

The market capitalisations of the project owners ranged from $6.6 billion for NexGen Energy, owner of the Rook I uranium project in Canada, down to $60 million for Antler copper project owner New World Resources.

The IRRs of the projects on the listed ranged from 19% (Aura’s Tiris) to 300% for Spartan Resources (ASX:SPR) Never Never gold project in WA, based on Argonaut’s calculations. It said Never Never was an outlier due to low capital costs and rapid returns.

The average IRR for the group was 51%, including Never Never, or 36% without.

The project with the highest net present value was Rook I, at just under $5 billion, followed by De Grey Mining’s Hemi at $4.3 billion, while the lowest was Tiris at $430 million.

Rook I also had the highest capex at $2.4 billion while Develop’s Woodlawn had the lowest capex at just $49 million.

Woodlawn and Kiaka are expected to be in production next year, with Never Never and Capricorn Metals (ASX:CMM) Mt Gibson set to follow in 2026. Patriot’s Shaakichiuwaanaan has the longest runway, with first production likely in 2030.

How did the class of 2023 fare?

There were 11 projects on last year’s list and their owners lost a collective 17% of value over the period due to the weakness in battery metals.

The best performer was Sovereign, up 81% over the year, mainly due to Rio Tinto takeover speculation. The worst was Global Lithium Resources (ASX:GL1) , which was down by 82% due to weak lithium market conditions, as well as concerns over the influence of a Chinese shareholder.

Jaguar, Hemi, Antler, Rook I, Kasiya and Northern Minerals’ Browns Range were all on last year’s list.

SolGold (ASX:SLG) Cascabel, Peak Resources (ASX:PEK) Ngualla, Atlantic Lithium (ASX:A11) Ewoyaa, Global Lithium’s Manna and Evolution Energy Minerals (ASX:EV1) Chilalo were all on last year’s list but dropped off in 2024 for various reasons.

“Deterioration of battery metal pricing and investor sentiment negatively impacted the progression of lithium, nickel, and graphite projects,” Argonaut said.

Contenders for next year?

Argonaut’s report also included six “special mentions”, being projects which have either not reached the study phase, or do not meet all the criteria at this stage.

They are Wildcat Resources (ASX:WC8) Tabba Tabba lithium project in WA, Magnetic Resources (ASX:MAU) Lady Julie gold project in WA, WIA Gold (ASX:WIA) Kokoseb gold project in Namibia, Encounter Resources (ASX:ENR) Aileron niobium project in WA, Ora Gold (ASX:OAU) Crown Prince gold project in WA and Resouro Strategic Metals (ASX:RAU) Tiros rare earths-titanium project in Brazil.

“Inclusion means we expect to see some of these projects progressing to our BUPs main list in coming years,” Argonaut said.

Five of last year’s special mentions (Never Never, Luni, Bankan, Shaakichiuwaanaan and Meteoric Resources (ASX:MEI) Caldeira) graduated to the main list this year, while Azure Minerals, owner of the Andover lithium project, was acquired by Hancock Prospecting and SQM for $1.7 billion in early 2024.

Chalice’s Julimar, a 2022 special mention, made it onto the main list in 2024 after being omitted last year.

Argonaut noted that last year’s special mentions outperformed the main list, as well as other indices.

“Over the past 12 months, the share price of companies with projects featuring as special mentions in 2023 increased an average of 58%, outperforming both the S&P/ASX 200 (+12%) and S&P/ASX Small Resources (+21%) indices,” it said.

Wia, now led by former Centamin boss Josef El-Raghy, was the best performer, up 356%.

At Stockhead we tell it like it is. While Sovereign Metals, Aura Energy, Spartan Resources and Magnetic Resources are Stockhead advertisers, they did not sponsor this article.