If you missed Callum Newman’s Money Morning article yesterday, go back and give it a read.
In it, he talks about why the resource sector continues to be a great investment space.
More specifically, he pointed out how Rio Tinto is committing $733 million to its copper projects. This is just the latest evidence in a long list of exciting developments for the critical mineral.
But personally, I think the far bigger news for resource investors came on Tuesday…
It was the day the government released its long-awaited update for our own Critical Minerals Strategy. A piece of policy that could shape our resource sector and the investor opportunity for decades to come.
And what did we get?
A whole lot of nothing, really.
$500 million worth of government money going toward the Northern Australia Infrastructure Facility (NAIF) was the only meaningful policy in the whole update. Other than that, there is plenty of good ideas present, just no clear direction on how the government plans to implement them.
For example, the media release mentions that the government is working with industry to link them with international partners. A few key markets specifically named are the US, UK, Japan, Korea, India, and the EU.
But there are no details on what help the government is really offering on this front.
And that’s because I suspect they’re offering nothing meaningful at all…
More money, less talk
The fact of the matter is a stronger critical minerals sector simply requires more money.
Underinvestment is the biggest threat to this trend. Not a lack of interest from international buyers.
A lot of the smaller and newer projects just can’t secure the funds to get a mine up and running, mainly because investors are unwilling to take a chance on such risky ventures when safer alternatives exist.
I mean, just look at what Woodside Energy Group [ASX:WDS] is doing.
On the same day this critical minerals update was released, Woodside announced a new $10.6 billion oil project in Mexico. Known as Trion, this deepwater venture is expected to produce 479 million barrels of oil and be profitable in less than four years.
In other words, while most are getting excited about renewables and net zero, Woodside is doubling down on fossil fuels. And to be honest, investors are lapping it up right now.
Woodside shares have held up pretty well despite falling oil prices. And their commitment to this Trion project saw a modest rise in the stock as well. Proof that the market believes that oil isn’t going away anytime soon, either.
Like I said, though, it is the money that matters.
The fact that Woodside is able and willing to commit so much to oil is what is telling. If the government — and the downstream buyers, for that matter — want similar results for critical minerals, then they need to stump up the cash.
So, what does it mean for you and your investment strategy?
It means finding the right resource stocks is more important than ever…
The art of stock picking
The overall point here is that resources are likely still the best game in town right now.
The issue is that not all the opportunities are made equal.
You can find plenty of exciting up-and-coming critical mineral plays on the ASX.
But those companies are likely to live and die by the amount of funding they can secure, but the current high interest rate climate is becoming increasingly challenging.
That’s why Woodside and its fossil fuel profits are beating expectations. Because, as promising as critical minerals are for the world of tomorrow, right now, oil and gas are still the big money makers. And that’s after accounting for the falling price of oil and gas too…
Does that mean you should invest in fossil fuels in the short term with a view to swap to critical minerals in the long term?
It certainly is one way to play the market right now, but it is far easier said than done.
The hard truth is that your best bet is to learn from the experts right now. And I say this because I work with some of the best.
Here at Money Morning, we’re lucky to have people like James Cooper, Murray Dawes, Greg Canavan, and many more. They are market experts with the experience to know what is happening across the ASX and the knowledge to grasp what stocks are best to profit from.
As Cal pointed out yesterday, Greg’s advice to invest in coal last year was a standout. His bet on Whitehaven was an incredible decision that netted his readers an even more incredible return.
But Greg’s strategy isn’t the only one. Like I said, we have a plethora of people and ideas working to ensure readers like yourselves have the best chance to make the most out of the market.
Regards,
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Ryan Clarkson-Ledward,
Editor, Money Morning
