More than 50 junior and not so junior mining and exploration companies descend on Royal Pines on the Gold Coast for the Resources Rising Stars’ annual investor conference next week.
Picking a conference theme ahead of time is never easy. But at a pinch, the 700 high net worth investors who like to dabble in the junior space will no doubt be talking up the warm weather first up.
Then the conversation could well switch to the high performing silver stocks in attendance for the Tuesday and Wednesday gathering – Andean Silver (ASX:ASL) and Sun Silver (ASX:SS1).
The pair have been mentioned here previously, funnily enough on August 15 post another mining and exploration over in the West, Diggers & Dealers, where the theme was gold, gold and gold.
But the silver stocks have continued to outperform their gold cousins. Andean was 66c on August 15 and has moved up to 93c. Sun Silver, a 20c IPO in May, has gone from 40.5c since August 15 to 61.5c.
Interest in silver is up because of the big thematic that it faces a coming supply deficit as the world continues to plaster itself with solar panels. It’s why the silver price has broken away from the low $US20s in recent years to hover around $US30/oz.
Sprott and others will tell you that $US50/oz is the next port of call, which would take the metal back to the record levels of 1980 when the Hunt brothers from Texas tried to the corner the market in the most conductive of metals, as an inflation hedge mind you.
To that macro outlook both Andean and Sun Silver have added their own upside by growing the resource base at their respective projects. Andean has previously flagged a resource upgrade in September, and another by the end of the year.
About double the current 50Moz is the expectation at its Cerro Bayo project in Chile. SCP Equity has just initiated on the stock and reckons the first 100Moz silver-equivalent should come quickly and cheaply. It has a $2.60 price target on the stock.
It makes the point that direct peers with Andean’s sort of scale trade at over $US200m (Andean’s market cap is $A105M) without having a mill on site as Cerro Bayo does from previous mining operations.
It is a typical North American perspective and has implications for Sun Silver with its $76M market cap. It has just recut the resource estimate at its Maverick Springs project in Nevada to arrive at 423Moz of silver equivalent.
Uranium/Boss:
Anyone would think that the ASX uranium stocks were having a lithium moment, one where share prices crash have crashed in response to a collapse in demand and pricing.
Leading issues like Paladin (ASX:PDN), Boss Energy (ASX:BOE) and Deep Yellow (ASX:DYL) are all down by more than 40% from their peaks in May.
But the reality is that at the macro level, things have actually got better for the uranium stocks in the period since the peaks in May.
Yes, the spot uranium price is down from $US90/lb in May to $US78/lb but the all-important contract price – the price that end-user utilities focus on rather the speculator-filled spot price – is actually up from $US78.50/lb (May) to $US80.50/lb (July).
The current contract or “long-term” price is up $US56.88//lb from a year ago. So no, there is no uranium price drama to explain why uranium stocks have been hit so hard of late. It can be suggested then that they have moved into oversold territory.
Countries around the world, and one side of politics here, are increasingly turning to nuclear power as a key energy decarbonisation tool. A huge supply challenge is emerging. It will require incentive pricing to fix.
Somewhat surprisingly, the beaten up levels of the ASX uranium stocks is despite the near 10% kick they got on Monday in response to news over the weekend that the world’s biggest supplier, Kazakhstan’s national uranium group Kazatomprom (KAP), was forecasting 17% lower production.
Cantor Fitzgerald analysts reckon the guidance revision would serve as a “market clearing event” for industry players, and would likely drive renewed activity in the spot and long-term markets.
“In our view, this is a clear indication that fundamentally, spot uranium prices have likely bottomed,” it said.
As a result, it expects the “next direction move for the uranium equities will be higher”.
That’s welcome stuff for investors who waded into the ASX uranium sector back in May.
As it is, Boss managing director, Duncan Craib, will be on hand at the RSS conference in the morning session on Wednesday to give his take on where the market is at, as well as updating the crowd on the return of its Honeymoon mine in South Australia to production.
It can be said that Craib knows the uranium market. In March 2021 he had Boss acquire a 1.25M/lb stockpile of uranium at a knockdown price of $US30.15/lb as a derisking exercise for future production from Honeymoon, and as a bet that uranium’s time in the modern era had arrived.
Copper/BHP
BHP gave the copper juniors a confidence boost during the week. In a commodities outlook released with its profit report, BHP was sticking to its guns with a prediction that there would by a “fly-up”’ in prices for the red metal in the back third of the decade.
Before that there is likely to be a couple of small surplus years before a widening supply deficit emerges, forcing the need for incentive pricing to arrive in a big way if there is any hope of the meeting the supply challenge.
BHP boss Mike Henry said global demand for copper is projected to grow by around 70% by 2050, driven by continued urbanisation and industrialisation which means more air conditioners, fridges and electronics.
Then there is the new wave of demand from the energy transition – renewables, electric vehicles, and the power infrastructure to enable it, and the need for data centres to support increasing computerisation and use of Artificial Intelligence.
“We are not yet seeing an adequate supply side response to meet this forecast demand. The challenges to bringing on new supply remain significant, and that is reflected in consensus long term copper price expectations inching upwards,’’ Henry said.
Alkane/Caravel/Talisman:
As it is, the copper price has pushed its way back up to $4.20/lb after dipping below $US4/lb earlier this month.
It is a price that provides more than enough encouragement for juniors with an eye on developing projects with a view to capturing the fly-up in prices that BHP suggests is in the offing.
One of the supply challenges facing the industry is that there will have to be a greater reliance on bulk mining projects at a lower grade than the industry has normally be accustomed to dealing with. The solution is higher incentive prices.
It is why two presentations at RRS on Tuesday from owners of bulk tonnage lower grade projects fit for the new copper paradigm – those owned by Alkane (ALK) and Caravel (CVV) – are made to measure in the wake of BHP’s commentary.
Apart from its Tomingley gold mining operation south-west of near Dubbo, Alkane also owns the Boda/Kaiser discoveries with a combined resource base of 8.3Moz of gold and 1.5Mt of copper. Plug in a fly-up in copper prices (gold is already there), it is a Tier 1 project in the making.
It can be suggested that Alkane’s market cap is more than covered by Tomingley, meaning little if any value is in the market cap for Boda/Kaiser. Look out for Alkane boss Nic Earner to address that very subject.
Caravel’s namesake project in WA is in the same basket. At $US3.50/lb copper it would seem to be in the too hard basket. But plug in prices of more than $US4/lb and its net present value takes off.
Caravel’s Don Hyma will be updating investors on the project’s progress in the planning and approvals phase, and quite possibly the state of play in the company’s engagement with potential strategic partners.
The conference also has a good number of copper/gold explorers ready to present their wares.
One that could create a bit of a buzz is Talisman (ASX:TLM) which recently added a big porphyry copper-gold exploration project called Yarindury to is portfolio. It is in the same neck of the woods as Boda/Kaiser in NSW.
A drilling program is close to kicking off. It is high-risk high-reward stuff. Drilling by Newcrest in a joint venture with Alice Queen in 2018 intersected favourable rock units with weakly anomalous copper and gold.
But no drilling has been completed over the largest and strongest anomaly on the western boundary of the Molong volcanic belt, also home to Newmont’s Cadia 100km to the south, and Boda/Kaiser 20km to the south-east.
Talisman reckons the anomaly it is about to test is a high-quality buried porphyry copper-gold target with very large tonnage potential.
We’re about to find out if that is the case.
Talisman has been mentioned here previously on the strength of its other NSW exploration interests, including the Durnings base metals discovery near Condobolin, and its self-funding status courtesy of an iron royalty in the west with Chris Ellison’s Mineral Resources.
Kerry Harmanis of Jubilee Mines nickel fame is Talisman’s chairman and will be back at the RRS conference this year. He recently topped up his Talisman stake to 19.5% by buying 231,209 shares on-market at an average of 19.9c a share. The stock traded at 21c on Thursday for a market cap of $39m.
The task of updating the conference on what will be a busy exploration effort by Talisman before the year is out falls to managing director Andrew Munckton. That means Harmanis will have plenty of time to scope out the dance floor for the poolside soiree at the Royal Pines venue on Tuesday night.
His moves at an ABBA tribute night last year were a sight to behold.
