5 things the market is missing (for now...)

1. Base metals are moving higher

Copper dominates the headlines, and we will have more to say on Livewire in the coming weeks on how we are positioned, but other industrial metals prices are moving higher, yet nobody is talking about them. Base metals are used in industrial applications, such as construction, manufacturing, and electronics.

Specifically, we are referring to commodities like zinc and aluminium. Even nickel, which was supposedly dead and buried, has been moving higher in recent months following supply curtailments.

We are seeing signs of physical tightness in these markets. Treatment charges (TCs) for zinc are processing fees paid by miners to smelters to convert zinc concentrate into refined metal, effectively acting as a discount on the final product's value. Zinc TCs just turned negative (i.e. the smelter is effectively paying for concentrate) because it's in such short supply, and it makes more economic sense for the smelter to do this than incur huge capital costs by ceasing operations.

When copper TCs turned negative in 2025, the copper price rose 40% over the subsequent 12 months.

There are not many pure-play base metals miners on the ASX, and many have delivered underwhelming production in recent times.

Our preferred pick is Aurelia Metals (ASX: AMI), which is the standout from a risk/return perspective.

Aurelia operates the Peak and Federation mines in the Cobar region of NSW, with the Great Cobar mine set to ramp up over the next few years. It produces gold, copper, zinc, lead and silver at these mines. With no debt, ~$100 million in cash, and positive cash flow, Aurelia is well-funded to execute its growth pipeline.

At spot prices, Aurelia is producing ~100 koz pa AuEq (gold equivalent), split roughly 50/50 between gold and base metals. To put that into context of pureplay gold miners, which are more well understood across the market, 100koz pa producers like Pantoro (ASX: PNR) and Black Cat Syndicate (ASX: BC8) trade at $1.3 billion and $800 million market caps respectively, and the smaller 50koz pa Meeka Metals (ASX: MEK) has a $400 million market cap.

AMI trades at a $450 million market capitalisation, and a $350 million enterprise value, representing a >50% discount to equivalent peers. After backing out AMI's gold hedges (which are rolling off this quarter), some tax payments, and rehabilitation payments, we estimate AMI is printing $40-$50m of free cash flow per quarter and trading at only ~2x EV/FCF, with growth.

At the current AMI share price, we conclude that you are only really paying for current gold production, and getting growth (Federation ramping up, Great Cobar growth project under construction) + base metals production (substantial) for free.

The Cobar region is prospective, with recent exploration hitting 9m (3.8m estimated true width) @ 28.3% Zn, 15.4% Pb, 1.2% Cu, 0.9g/t Au, 27g/t Ag. That's a cracking intercept, by anyone's interpretation. If you had just the copper or gold on their own, it would still be a decent result. We like the mixture of gold and base metals, which have different price drivers and serve as a natural hedge. Aurelia has good leverage to further resource growth, utilising its sunk-capital processing infrastructure, which is worth its weight in gold in this inflationary environment.

As with most cheap stocks, AMI is cheap for a reason. However, we are comfortable that these reasons are largely historical (past acquisitions under old management team, past balance sheet stress, lack of willingness to engage with potential acquirers) or biased shortcuts (polymetallic metal mix, not a pure gold or copper play). Insiders have been buying on-market.

While a heavily speculated deal between MAC Copper (NYSE: MTAL), led by Mick McMullen, and AMI never eventuated, MAC was ultimately acquired by Harmony Gold (NYSE: HMY).  Our view is that Harmony is deal-hungry and working hard to reduce its jurisdiction discount, and will no doubt be keeping a close eye on AMI under new management.

We are invested across the Seneca Australian Small Companies Fund and Seneca Australian Shares Fund in miners, as well as in 'picks and shovels' plays that benefit from rising exploration activity and sample-testing volumes.

2. Royalty deals are heating up

We have observed a plethora of royalty deals in recent months, including those involving ASX-listed miners seeking project financing. Previously, small and mid-tier royalty companies have mainly featured in funding partnerships with ASX-listed companies, but over the last two months, we've seen this shift and the global royalty and streaming majors have entered the market.

Franco Nevada (NYSE: FNV) (A$62 billion market cap) struck a A$220 million royalty deal with gold developer Minerals 260 (ASX: MI6), and Wheaton Precious Metals (NASDAQ: WPM) (A$80 billion market cap) did a US$300 million streaming deal with copper developer KGL Resources (ASX: KGL), signalling the appetite for these types of deals in premier mining jurisdictions.

What's our angle here?

We own shares in a little company called Venus Metals (ASX: VMC). We outlined our thesis here on Livewire in February.

To rehash: Venus is a gold royalty company trading at a 40% discount, and management put up the 'for sale' sign in January, announcing a strategic review. VMC holds 48 million shares in Rox Resources (ASX: RXL), worth ~$21 million, and 1% royalty over Rox's Youanmi gold project in Western Australia, which we estimate is worth $40 million, maybe more if you:

• Reduce the assumed 5% cost of capital;
• Increase the (conservative) 7-year mine life;
• Think the forward consensus gold price curve is too low

VMC trades at a $45 million market cap at the time of writing.

On 7 April, Versamet Royalties Corp (TSE: VMET) paid US$360 million for a stream over a Canadian gold project. Interestingly, Versamet were willing to effectively pay 0% IRR (at spot gold) just to bank the optionality (a bet on mine life extensions and further exploration success). That would imply ~$70 million valuation for Youanmi royalty.

In this article, we told the story of Goldstrike, which discovered a lot more gold than initially thought, and all of that upside was enjoyed (for free) by the royalty holder. This is what makes royalty investing so attractive - you participate in the upside, exclusively. 

We think Rox has the potential to find much more gold at Youanmi, with recent drill intersections such as 5m @ 14g/t Au from 120m, outside the DFS mine plan. This looks like the tip of the iceberg. Many underground mines don’t operate with reserve lives exceeding 10 years, as deferring drilling can be more accretive to NPV.

If you've made it this far down, I'll assume you're happy enough to allow me some license to explain something else that has happened at Venus since our last article.

As mentioned, VMC is currently undertaking a strategic review via financial advisor Amicaa Advisors.

It has now been 3 months since the strategic review was announced. We believe an outcome is imminent.

On 2 April, Northern Territory copper developer KGL Resources announced a US$300 million streaming deal with North American behemoth Wheaton Precious Metals.

The financial advisor? You guessed it: Amicaa advisors.

Clearly, Amicaa has the right relationships with large offshore royalty specialists and can negotiate some cracking deals. Now for VMC.

We highlighted this a couple of weeks ago in Luke Laretive's weekly note. You can sign up for that (for free!) here.

3. Water is getting scarcer

While it might not be making headlines in the same way the petrol shortage has, a couple of low rainfall years in a row have set the scene for increasing water entitlement values that supply farmers to grow crops.

We own shares in Rivco (ASX: RIV), which trades at a 21% discount to NTA. Rivco is the only ASX-listed company that solely invests in Australian water entitlements. We covered Rivco's strategic value in this article.

Rivco's water rights relate to the Southern Murray-Darling Basin, a large area about the size of Germany that supplies water to farmers across Australia. Farmers can access water through a few different avenues:

• Owning entitlements outright;
• Buying water in the spot market; or 
• Leasing entitlements (through owners, like Rivco).

Water demand in the basin is growing as the crop mix has shifted over time, shifting more toward permanent, higher-value crops such as nuts, grapes, and seeds that require year-round water. Almonds have gone from using ~1% of water in 2004 to ~16% in 2026 (and growing). 

As an example of the kind of returns on offer these days, Rivco executed a long-term lease with ASX-listed almond grower Select Harvests (ASX: SHV) at a 5% rental yield in April.

We see low near-term earnings risk for RIV, given that temporary water prices continue to rise in the Murray-Darling Basin. Dam levels in the southern basin continue to decline below the long-term average of 51% and towards trough levels, which should be supportive for entitlement values.

We think the one broker covering this stock is conservatively underestimating the potential increase in Rivco's Net Asset Value (NAV), noting that the NAV reached a high of $1.93 in late 2022. We also note that the Federal government has been aggressively buying back entitlements, thereby structurally supporting asset prices.

It's not necessarily the sexiest asset class or company, but RIV has delivered 9.6% p.a. growth in NTA including dividends since 2016. Importantly, these high single-digit returns are relatively stable, forecastable, and uncorrelated with other asset classes. 

We think favourable weather conditions could drive above-average returns over the next 12-24 months.

4. Refining margins haven't just increased, they've exploded (and we think they're staying higher for longer).

This one's a bit more nuanced because the market is certainly paying attention to crack spreads, but we think the quantum is underappreciated.

There are only 2 Australian refineries still operating: 

1. Viva Energy (ASX: VEA)'s Geelong refinery in Victoria, and 
2. Ampol (ASX: ALD)'s Lytton refinery in Queensland, 

following a string of other refinery closures over the last two decades. 

Australia's lack of domestic refining capacity and a generational oil/fuel crisis have seen refining margins inflect sharply higher.

This positive margin impact hits Viva's books in March - Viva reported refining margins of just over US$40/bbl. That's a 5x increase over the prior period.

Despite the scale of disruption to global fuel supply chains, refinery shares, particularly VEA, have not moved anywhere near as much as we would have expected.

We believe analysts have been slow to adjust forecasts, and VEA is still cum upgrades of significant magnitude.

The recent fire at Viva's Geelong refinery dampened market enthusiasm for VEA, but the fundamentals remain. Viva allayed concerns with its announcement dated 20 April, stating that the company expects to restart the reformer and residue catalytic cracking unit (affected by the fire) to lift production of diesel, jet fuel and petrol to over 90% of capacity over the next few weeks.

Pre-crisis, we thought the stock was cheap when assessed on each of its divisions.

Note that this assessment includes a fairly minimal valuation assigned to the Energy & Infrastructure division, which houses Viva's Geelong refinery. Post-crisis, we can't help but feel that the market is largely ignoring the strategic value of this refinery.

If we have learned anything from this fuel crisis in Australia, it is that our domestic fuel reserves were critically underprepared and over-reliant on foreign imports. Strategic reserves need to be replenished and are currently undergoing rapid drawdown, which we expect will lead to pent-up demand for Viva products in the future.

On a replacement-value basis for the refinery, our valuation for the Energy & Infrastructure division increases by 3-4x, adding almost $1.00 per share, which we believe the market is overlooking. The recent spike in refining margins should also lead to faster debt retirement than previously thought, which increases our valuation.

This is just the kind of mid-cap value idea that the market doesn't care about, until it does.

We remain overweight VEA in the Seneca Australian Shares Fund, which owns 37 other large- and mid-cap companies, with a stock-specific thesis similar to this.

5. Guyana is the world's hottest exploration province (and our #1 small cap pick)

Keen observers will have seen a recent uptick in gold discoveries and M&A in the South American country of Guyana.

Guyana's geological history means it has effectively West African geology (Cote d'Ivoire) geology without being in West Africa and carrying the associated sovereign risks that keep many investors on the sidelines. Over 300 Moz of gold has been discovered on the West African side, versus ~100 Moz on the South American side.

As a mining jurisdiction, Guyana is on the rise. While better known for its offshore oil endowments (mining contributes substantially to GDP), Guyana has a favourable permitting regime and has emerged as one of the best South American mining jurisdictions.

Due to government policy (minimum local ownership) and fragmented tenement ownership (only small blocks previously explored), the country is significantly underexplored for minerals. In recent years, multiple tier-1, high-grade gold deposits have been delineated by mid-tier gold companies, resulting in billion-dollar-plus valuations.

“A significantly underexplored region and one of the most prospective in the world for large-scale gold discoveries."

Mark Bristow, CEO of Barrick Gold (NYSE: GOLD), on Guyana

Enter Altair Minerals (ASX: ALR). $250 million market cap.

Altair holds Guyana's largest gold exploration project, holding a 592km² land package - a considerable advantage when most other exploration companies in the country hold less than 5km².

Altair's management team struck a clever deal with an influential Guyanese family whereby Altair earns into 70% of the project, with the vendor retaining 30%. We understand that the vendor rejected higher cash offers in favour of retaining equity and has even bought ~$2.5 million of ALR stock on-market since the transaction for an additional ~8% of the company.

ALR's management team has deal-making expertise in Faheem Ahmed, behind Viridis Mining & Metals (ASX: VMM), and in-country expertise in Rich Munson (who led the 10Moz Toroparu gold discovery, now owned by Aris Mining).

Altair's South Oko project sits along the same Oko shear zone as GMining Ventures (A$1b takeover of Reunion)'s Oko West project - 5.9Moz @ 2.2g/t Au, and G2 Goldfields OMZ & Ghanie projects - 3.2Moz @ 4.0g/t Au. It's all shallow, free milling, high-grade gold. GMIN's feasibility study talks to 350kozpa over a 12-year mine life at a AISC of US$1,123/oz, which would put it on par with ASX producers like Ramelius (ASX: RMS), Vault (ASX: VAU) and Genesis (ASX: GMD).

Altair's project sits just 1.5km and 3.5km away from those two deposits, respectively, and directly adjoins GMIN. ALR has 3x the strike extent of GMIN and G2 to the north, and has a large gold-in-soil anomaly.

Altair is currently drilling South Oko for the first time. With a large gold-in-soil anomaly and +100 gram-metre trenching results, we look forward to the imminent drilling results.

While we await results, West Africa's largest gold miner, Endeavour Mining (TSX: EDV), capped at A$19 billion, just took a 9.9% stake in ALR for A$28 million. This is big news, as Endeavour hasn't historically wasted its time on taking stakes in juniors, instead opting for company-making acquisitions of scale. Should ALR have exploration success, there is now competitive tension in what we see as a likely takeover target, given GMining would undoubtedly be interested in consolidating the greater Oko shear after its recently proposed merger with G2.

We covered ALR at 2 cents per share for our subscription research service, Good Research, on 31 March (it is now trading at 4.5c, up 125%). At the time of writing, there are 44 subscriptions remaining (if that kind of investing is your thing). 

Explorers do not comprise a large part of our portfolio. Right now, we only hold 2 explorers (ALR and one other). 

Most are just are not that attractive (funding risk, well-explored projects, or only speculative potential, etc). However, every so often, we come across something or attend a meeting that warrants further investigation. ALR is, in our view, one of those rare occurrences.

Across the Seneca Australian Shares Fund, or the Seneca Australian Small Companies Fund, we own shares in AMI, VMC, RIV, VEA, and ALR. Ben Richards & Luke Laretive are investors in both funds. 

If you'd like to invest with us, you can apply for both funds here.