Buy Hold Sell: 5 up and coming mining stocks
If Livewire Markets were an exclusive club, its members (as you well know), would be partial to stock picks, fund manager insights, and getting rich(er) without having to die trying. However, it seems, particularly of late, that emerging resources, metals and material stocks have a certain je ne sais quoi to whet your appetite.
It makes sense. After all, the S&P/ASX Small Ordinaries Resources Index has returned 42.25% over the past 12 months, nearly double the S&P/ASX Small Ordinaries Index (24.96%) and the S&P/ASX 200 (22.49%). In case you were wondering, the benchmark return also far surpassed that of the S&P/ASX 200 Resources Index (9.39%), which contains dividend darlings like Fortescue Metals and BHP.
So in this episode of Buy Hold Sell, Livewire's Ally Selby is joined by two small-cap resources specialists for their insight into some of the sector's up and comers, with Eley Griffiths Group's Tim Serjeant and Argonaut's David Franklyn sharing their thoughts on skyrocketing stocks across lithium, gold, copper and uranium.
Note: This episode was filmed on Wednesday, 27 October, 2021. You can watch, listen or read an edited transcript below.
Ally Selby: Hello, and welcome to Livewire's Buy Hold Sell. I'm your host, Ally Selby and boy, have we been receiving a lot of requests from readers asking for fundies thoughts on emerging resources and material stocks. So in this episode, we'll be discussing five up-and-coming companies across uranium, copper, lithium, and gold. And to do that, we're joined by Tim Serjeant from Eley Griffiths Group and David Franklyn from Argonaut.
First up, we have battery materials exploration and mining company, Liontown Resources. Tim, I might start on you. Is it a buy, hold, or sell?
Liontown Resources (ASX: LTR)
Tim Serjeant (SELL): Sell. It's been a great place to be, large, undeveloped, hard rock, spodumene asset in Western Australia. But at $3.5 billion with still $700 or $800 million to spend, I think we've probably seen the best of it.
Ally Selby: David, over to you. It's had a spectacular run over the past 12 months. I actually think it was one of the best performing small caps. It's risen more than 654%. Is it a buy, hold, or sell?
David Franklyn (HOLD): We love the asset, but we balk at the valuation, so it's a hold for us. Look, it's got a lot of attributes that we like. It's a large, high-grade lithium resource in a Tier 1 location just out of Kalgoorlie. So a lot going for it, but the valuation is a bit stretched.
Pilbara Minerals (ASX: PLS)
Ally Selby: Next up we have Pilbara Minerals. It recently announced a new joint venture with South Korean company, POSCO. David, staying with you, is it a buy, hold, or sell?
David Franklyn (BUY): We rate Pilbara as a buy. It's our preferred lithium exposure. Basically, it's in the right place at the right time. It's a large scale producer at a time when the lithium price is continuing to escalate. As you said, they've just announced a processing joint venture with POSCO, which we view very positively. And they probably did the deal of the year last year when they bought the Altura lithium operation from the receivers at a very good price. They're ramping up production. They've got processing now underway and it's our preferred exposure. So it's a buy.
Ally Selby: Tim, it has a market cap of $6.6 billion and its share price has risen over 515% over the past 12 months. Is it a buy, hold, or sell?
Tim Serjeant (BUY): Buy, Ally. It's relatively better value than most of the lithium names at present. David is right. It's got volume growth where others don't at the moment into a record pricing environment and it's inherently scalable as the market continues to grow.
De Grey Mining (ASX: DEG)
Ally Selby: Tim, staying on you. Next, we have struck gold with De Grey Mining. Its share price has been quite a volatile ride for shareholders over the past 12 months. Now, it's pretty flat. Is it a buy, hold, or sell?
Tim Serjeant (BUY): Buy, Ally. 500,000 ounces per annum for over 10 years in Western Australia makes it a Tier 1 asset in a global gold context. There are just two issues to monitor over time, I think both of which are intertwined, which are CapEx and recoveries. I think both are eminently solvable, it's just whether it's De Grey or someone else.
Ally Selby: David, over to you. It has a market cap of around $1.4 billion and it recently completed an institutional capital raise of around $125 million. Is it a buy, hold, or sell?
David Franklyn (BUY): We've got it as a buy, Ally. It's a Tier 1 asset in a Tier 1 location. It's going to be attractive. It's either going to move through development and become a global producer of scale and be well sought after or else, and just as likely, a major will look to acquire it relatively soon. So we like it.
Aeris Resources (ASX: AIS)
Ally Selby: Next up, we have copper exploration and mining company, Aeris Resources. It's a bit smaller than our other stocks that we are discussing today. It has a market cap of $423 million. David, staying on you. Is it a buy, hold, or sell?
David Franklyn (BUY): We rate Aeris a buy. They've got an undemanding valuation. It's well managed. We expect that corporate activity will be a key feature of the group going forward. They've currently got a small copper operation in New South Wales and a gold mine in Queensland. We think there's scope for some consolidation in the Cobar copper space. We know that Glencore are looking to sell their CSA copper mine, and they've shown that they're acquisitive for gold assets. We are backing the management team there to add value over the course of the year.
Ally Selby: Tim, over to you. It's also had a stellar 12 months. Its share price has risen around 216% over that period. Is it a buy, hold, or sell?
Tim Serjeant (BUY): Buy, Ally. The asset base is improving. I think down the track we're going to see better production, a better cost, and probably longer mine life. The business is now net cash having been capital constrained for a significant period of time. I like that. I think M&A can move the needle as David touched on and I'm willing to back them on that strategy.
Paladin Energy (ASX: PDN)
Ally Selby: Last, but certainly not least, we have uranium company Paladin Energy, which operates across Africa, Canada, and Australia. Tim, staying on you, is it a buy, hold, or sell?
Tim Serjeant (BUY): Buy, Ally. I don't expect it to be smooth sailing from here, but at the end of the day, we're still relatively early in the uranium cycle in my view. The industry has been capital starved, demand tailwinds are emerging. I think Paladin's the cleanest way to play that on the assets.
Ally Selby: David, Paladin's share price has risen a whopping 625% over the past 12 months thanks to a rising uranium price. Is it a buy, hold, or sell for you?
David Franklyn (HOLD): We've got it as a hold, really on valuation terms. The uranium stock we prefer is NextGen (ASX: NXG), which is listed in Canada and has a Canadian project. What we like about it is just the scale and grade of their project. Still relatively early days, but has the potential to be the lowest-cost producer globally and has a long mine life.
Ally Selby: Well, I've really enjoyed that episode of Buy Hold Sell and I hope you did too. Remember to subscribe to our YouTube channel. We're adding new content every week.
What small-cap miners are you backing?
David and Tim both agree that there are quite a few buys on this list. But what do you think? Let us know what small-cap miners you are backing (and why) in the comments section below.
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Buy Hold Sell is a weekly video series exclusive to Livewire. In each episode two fund managers give their views 'Buy, Hold or Sell' on five ASX listed companies. Not recommendations, please read the disclaimer and seek advice where appropriate.