The Quality Filter: How to Find Resource Stocks Built for Turbulent Markets

I sense there’s a lot of confusion in markets, particularly here in Australia.

So, I thought I’d share my thoughts and give you some tangible features to look for when buying companies in this type of market.

First, it’s important to make the obvious point: all markets involve risk; you can’t escape that as an investor.

But there are things we can do to minimise it!

One simple strategy: add your positions during the market’s more depressed phases.

It just so happens that I think we’re entering one of these periods right now…

Can our economy absorb the shock of back-to-back rate rises, and will house prices hold up? Will our most important industries have access to the fuel they need?

There’s plenty of worry in markets today, and to be clear, there are segments that warrant extra concern.

But this is exactly the type of anxiety that you can use to your advantage.

Having the courage to move against the market tide isn’t easy, but in my mind, it’s the easiest thing you can do to reduce risk.

BUY LOW.

Incidentally, that’s why I advised my readers NOT to buy in the early part of this year, when speculation was rampant across the resource sector.

All of our existing positions were put on hold.

The exception was traditional energy, which was one of the few areas where we remained active.

But the goal posts in markets are constantly shifting…

And we’re adjusting.

Fear is opening the door to new opportunities… So, it’s time to start becoming active again.

However, that comes with a note of caution:

Today, we’re moving into a high-cost, potentially inflationary setting. Now more than ever, stock selection matters.

So, I thought I’d briefly share some of the core criteria (I look for) in companies that could weather the pressure better than most.

Going under the hood

If we are entering higher inflation, strengthening commodity prices ALONE may not be enough to sustain certain producers.

So, here are some ‘investment buffers’ I’m looking for:

#1: Steady-state production

When markets are uncertain, the last thing you want in a company is unreliable guidance.

If a stock continually misses its production forecasts, it shows a lack of knowledge of the deposit and/or inexperience at the management level.

In this market, you want skilled operators and companies with a strong track record of consistently delivering on their production targets year after year.

Bottom line: I expect the market will become extremely unsympathetic to companies that miss this important metric.

This is not the time for nasty company announcements.

#2: Low Cost Production

An obvious but important one.

Higher inflation translates into higher input costs for producers: diesel, sulphuric acid, labour, and equipment.

This is bad news for low-margin businesses.

Yet, low-cost operators will be able to absorb that pain much more readily than companies relying exclusively on higher commodity prices to sustain profitability.

As of early 2026, the average All-In Sustaining Cost (AISC) for Australian gold producers was approximately US$1,600 to US$2,000 per ounce.

Anything above that could be at a higher risk in this market.

Another example: One of the copper producers in our portfolio recently released its 2026 cost guidance.

That came in at around $2.20-$2.50/lb for payable copper.

That sits at the lower end in terms of copper production, so it’s exactly the type of producer we want in this market.

#3 Access to Energy

Diesel and gas are the lifeblood that sustain mining operations.

However, the more remote the project is, the more exposed it will be to fuel shortages. Mining operations are inherently isolated, but some more than others.

Importantly, the mines in the more established regions will have access to Australia’s gas pipeline network, reducing reliance on diesel.

For example, the Karlawinda gold project in Western Australia is primarily powered by gas transported via the Goldfields Gas Pipeline, which helps protect against rising fuel costs and supply issues.

Extremely remote projects, on the other hand, tend to be ‘off-grid’, where a lack of gas pipeline access is substituted for heavy-duty ‘diesel-thirsty’ generators.

That, of course, leaves them more exposed to fuel shortages.

So, location and access to critical infrastructure could matter a lot more in future. And companies that sit favourably in established regions could command a premium.

Final Takeaway…

That’s just three things I’d be looking for; beyond that, balance sheet health, low debt, and long-term fuel hedges.

There’s plenty to consider as an investor.

But focusing on these core items could leave your investments far less exposed to negative market forces, and also position them for higher market premiums.

We’re entering a market that’s going to focus on and reward quality above anything else.

Bottom line: higher commodity prices alone may not be enough to sustain certain operations. Stock selection is going to matter a lot more in the months and possibly years ahead.

So, know what’s under the hood, and maintain a discerning eye.

If you want a guiding eye to help you model an ideal resource portfolio, you can do so by following more of my work here.

Until next time.