Later this week, I’m going to start really earning my keep here at The Daily Reckoning Australia.
I’ve enjoyed my ‘bedding-in’ period, giving you my inside take on what’s happening inside a resurgent Australian mining space.
But soon…starting Thursday…we’re going to get down to the real nitty-gritty.
We’re going to start talking about specific stocks.
Explorers and near-producers that I think are weightily discounted right now. And poised for a run that could rival the metal explorer stocks of the mid-2000s.
I’m going to bring an exploration geologists’ skillset to the table when assessing these stocks, which I think is pretty unique.
But you’ll have to wait and assess that for yourself.
In the meantime, let’s just get a quick ‘pitch report’ of the field you’ll be entering if you decide to act on a few of my recommendations before the end of this year…
‘A feeding frenzy…’
‘Feeding frenzy for mining stocks’, Mining.com reported on Friday.
Shares in the world’s largest mining companies have been rallying hard after sizeable jumps in copper and gold prices.
That’s the big global backdrop.
The story I’m interested in is what’s happening here on the ground in Australia…
On the whole, I imagine most Aussie investors will be glad to see Christmas and the end of this terrible year.
But there are a few pertinent facts I think it’s very valuable to point out.
Of the three best-performing Australian large caps in October, two were mining stocks. And two of those took out the two best best-performing positions.
Liontown Resources [ASX:LTR] was the number one performing ASX 200 company in October 2022.
Its share price rose 26.8% last month.
That’s a big jump for a large-cap in a terrible market.
Most notable is Liontown’s game, which is lithium.
The Western Australian Government just green-lit its operation at the Kathleen Valley Lithium Project. Major site works are about to get underway.
This is part of a wider story that I believe is going to benefit smaller explorers in 2023. It doesn’t just involve the battery-making ingredient of lithium. Although that’ll be part of it. And I’m betting it’s going to potentially result in a LOT more than just 27% in a month if you pick the right explorers. I’ll be naming several of these stocks later this month. So stay tuned for that…
The number two best-performing ASX 200 stock of October 2022?
What do you know?
Another lithium stock.
Core Lithium [ASX:CXO] took out the silver medal for October with a 25% gain.
Keep in mind: These are mega large caps. Monthly gains like these are rare from blue chips even in normal markets…let alone the kind of conditions we’ve had throughout 2022.
Its leap was on the back of news that its Finniss lithium mine is now formally open for business.
Perseus Mining [ASX:PRU] also made the ASX 200 top five in October with a rise of 20.1%.
But those are just the biggest of the big companies.
Let’s drill down a little further…into the
CRITICALLY ENDANGERED METAL SPACE
OK, so here’s where it gets interesting.
We’ve already covered these in a three-part series.
But this is where some real fireworks are starting to go off.
Here you’ve had companies like Lindian Resources [ASX:LIN], a bauxite explorer…with a market cap of just $190 million…that’s put on well over 500% this year.
Yes…this year. It has a 12,500-metre, outside of China, drilling program kicking off in Malawi next month.
Galileo Mining [ASX:GAL] is a nickel hunter that exploded in May after announcing a new discovery at its Norseman project.
It’s up more than 300% in 2022.
Odessa Minerals [ASX:ODE] and Dreadnought Resources [ASX:DRE] are two rare earth explorers who have put on hundreds of percent this year.
As you know, this is the space I’m really fired up about.
Rare earth juniors are incredibly risky, though.
This is not an area to tread if you don’t have money you’re prepared to lose.
For every success story there are multiple failures. Even in a market that’s generally in your favour.
You need to get all your ducks in a row to pick the right stocks before the wider market catches on.
That means a deep understanding of risk versus reward in the development cycle.
A key part of investing in resource stocks, and rare earth plays, is understanding the stages of maturity. There’s much more to this than simply identifying a producer versus an explorer.
Knowing where the company sits in its life cycle helps you understand the level of risk you’re taking on.
Just as important is that you need to have good people working for YOU.
It’s a bit of a cliché in business but investing in the right people is a key to success in resource investment. The reason? Mining is affected by many external risks, which makes experience especially important.
There are a LOT of resource companies listed on the ASX, but only a handful are managed by people who have a proven track record of DISCOVERY or OPERATIONAL SUCCESS.
These people know what it takes to navigate the threats and extract the greatest potential from their assets. If management hasn’t made a discovery in the past, then they’re not worthy of your capital until they do.
In the same light, if a board has never operated a mine of a similar scale, they’re more likely to run into catastrophic events that can lead to months of reduced production and falling revenue.
There are other ‘ducks’ that need to be lined up, too.
Which is exactly what I’ve been doing over the last few weeks.
Want to know which specific stocks I’m pulling the trigger on for 2023?
Stay tuned later this week…
Regards,
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James Cooper,
Editor, The Daily Reckoning Australia
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