MoneyTalks is Stockhead\u2019s regular drill down into what stocks investors are looking at right now. We\u2019ll tap our extensive list of experts to hear what\u2019s hot, their top picks, and what they\u2019re looking out for.<\/p>\n
Today we hear from Canaccord Genuity senior mining analyst Tim Hoff<\/strong><\/em><\/p>\n Last time Tim Hoff graced the MoneyTalks stage he delivered a sermon on investing in explorers making real discoveries, and his picks did not disappoint.<\/p>\n Yes their discoveries were all made, but he still saw the value yet to be crystallised in lithium driller Azure Minerals (ASX:AZS)<\/a>, niobium hopeful WA1 Resources (ASX:WA1) <\/a>and gold digger Spartan Resources (ASX:SPR)<\/a> when we caught up with the mining boffin from Canaccord Genuity at last year\u2019s Diggers and Dealers Mining Forum in August.<\/p>\n Since our chat in the big tent next to the Goldfields Arts Centre in Kalgoorlie, Azure is up 36% (assuming your shares in the Andover project JV owner are sold into the $3.70 a share takeover from Hancock Prospecting and SQM), WA1 is 82.5% higher on its Luni niobium discovery and Spartan has stampeded a massive 83.3% after bolstering its high grade Never Never resource in WA to almost 1Moz.<\/p>\n This, unfortunately, isn\u2019t the way the world works and early investors in the three stories (aside from the recapped Spartan depending on your entry point) were already sitting on solid gains when Hoff made those picks.<\/p>\n But if you had decided to chuck $10,000 on those bets evenly at the time, you would be holding around $16,700 right now.<\/p>\n We are in an altogether different market now though, and Hoff says investors may have to show more patience in current conditions where sentiment is not floating all boats like it did during the 2021-2023 boom in battery metals.<\/p>\n \u201cI\u2019m reasonably commodity agnostic when it comes to exploration because by the time you find something and develop it, the cycle will be completely different,\u201d he said.<\/p>\n \u201cSo pro-cyclical exploration very rarely pans out.<\/p>\n \u201cIn the case of Azure it did, that was a discovery at about the point where prices were pretty punchy.\u201d<\/p>\n \u00a0<\/p>\n Instead, it\u2019s about finding companies with the management teams and geology to capitalise on long-term trends.<\/p>\n A case in point is lithium, where raw material supply growth suddenly overtook demand growth last year as battery makers piled up inventory and China\u2019s economy failed to pick up as many punters had hoped.<\/p>\n Hard rock lithium prices have slid from over US$8000\/t at the start of 2023 for 6% Li2O spodumene concentrate to US$850\/t, while downstream chemical prices are down from over US$80,000\/t to the low US$10,000s over the same time period.<\/p>\n That has seen Core Lithium (ASX:CXO)<\/a> halt mining at its Finniss project in the NT, the owners of the Greenbushes mine scale back production, Sayona Mining (ASX:SYA)<\/a> eat losses at its North American Lithium operation in Quebec and Liontown Resources (ASX:LTR)<\/a> scale back expansion plans for its upcoming Kathleen Valley mine.<\/p>\n But long term demand forecasts for EVs remaining strong, and great discoveries are ones with the capacity to succeed regardless of the price environment.<\/p>\n \u201cWe\u2019re seeing a lot of people concerned obviously with the price falling \u2014 a lot of pessimism around that,\u201d Hoff said.<\/p>\n \u201cI think we\u2019re trying to be realistic around it. And we\u2019re saying, hey, look, prices could stay subdued for some time. <\/p>\n \u201cBut the thematic is in place. We\u2019re seeing some value start to emerge across the space, but the kicker there is who\u2019s got a strong cash balance and a management team that has played these sorts of cycles before because cash preservation will be important.\u201d<\/p>\n Regardless of the cycle, those three things \u2014 management, cash and geology \u2014 will define which companies will be long term successes or which simply ride the waves.<\/p>\n \u201cThey remain to be keys at all times at the top or the bottom and we\u2019re closer to the bottom today than we are the top,\u201d Hoff said.<\/p>\n \u201cThere\u2019s not a strong amount of support for lithium companies right now. That being said, it is still the number one topic of inbound communication that we get.\u201d<\/p>\n \u00a0<\/p>\n Nickel companies are also suffering from weak sentiment after a halving of prices linked to an oversupply of nickel from Indonesia.<\/p>\n But Hoff sees some green shoots for the long term outlook for battery metals facing structural market changes like nickel and graphite. Notably, a wave of investment could be coming from Japanese and South Korean battery players aiming to stock up on future supply.<\/p>\n Just last week Alliance Nickel (ASX:AXN) revealed a non-binding MoU on nickel and cobalt sulphate supplies from its NiWest nickel laterite project in WA to Samsung and Novonix (ASX:NVX) announced plans to supply synthetic graphite from a proposed US plant to Panasonic.<\/p>\n \u201cThat\u2019s very interesting that at this stage nickel is being looked at by those majors, and it tells us that they still have problems to solve in the late 2020s,\u201d he said.<\/p>\n \u201cWe might be at the bottom of cycle pricing, but these companies that have plans to build battery factories need material for them.<\/p>\n \u201cI\u2019m probably on the record for saying I don\u2019t necessarily buy into the IRA supply chain and that it\u2019s going to make a massive difference. And my attitude on that has been we\u2019ve seen a complete lack of interest of inbound investment \u2014 hard dollars in the ground. This is the first little sniff we\u2019ve got.<\/p>\n \u201cIndonesia\u2019s had $14 billion of investment in its nickel industry, and how much have we invested in our nickel industry? They\u2019ve changed the dynamic through investment and we just haven\u2019t matched that.<\/p>\n \u201cDon\u2019t buy into this calling it dirty nickel \u2026 the auto industry wants low priced bulk nickel units and Indonesia is giving it to them. The signalling we get from a Samsung coming into the picture says okay, well maybe they are going to care a little bit about this.\u201d<\/p>\n For thematics like this, investors may need to look past the easy gains they saw in the hot battery metals market of the past couple years.<\/p>\n \u201cYou may have to stretch your investment horizon and look at what will this industry be doing in five years time and know it\u2019s not going to be a linear return,\u201d Hoff said.<\/p>\n \u201cYou might have nothing for a long time. And then you might have a lot at a really sudden moment. <\/p>\n \u201cSo it\u2019s certainly one way when we\u2019re out looking for names we\u2019re looking for a guy who can survive that long period, put their project into a position of some kind of strength and then when we see those upticks or we see those agreements, they\u2019re the ones front and centre.\u201d<\/p>\n \u00a0<\/p>\n Hoff\u2019s comments come on the eve of tomorrow\u2019s RIU Explorers Conference in Fremantle, where dozens of junior explorers will meet to provide a barometer of how the small end of town is travelling.<\/p>\n He says there are still gains that be found in junior resources, but the focus will shift to companies who have already made discoveries realising value through their resource estimation and study phases.<\/p>\n \u201cWe\u2019re still following those stories like Meteoric (ASX:MEI)<\/a>, like WA1, like Brazilian Rare Earths (ASX:BRE)<\/a>, which floated at the start of this year,\u201d Hoff said.<\/p>\n \u201cThose are all still very much early stage exploration stories, we\u2019re still finding out about those deposits.<\/p>\n \u201cIn some of those cases, there\u2019ll be value crystallisation as they go through the process.\u201d<\/p>\n Among the other companies with an exploration story to tell, Hoff mentioned two in particular is tracking.<\/p>\n One is Hillgrove Resources (ASX:HGO)<\/a>.<\/p>\n The company restarted bulk mining from underground at its Kanmantoo mine in South Australia in January, where it plans to produce 43,500t of copper in concentrate over an initial four-year period.<\/p>\n The mine plan is based off a JORC resource of just 6.4Mt at 1.09% copper and 0.12g\/t gold.<\/p>\n But an exploration target of 60-100Mt at 0.9-1.2% Cu and 0.1-0.2g\/t Au suggests a larger prize is waiting to be found.<\/p>\n \u201cThey\u2019ve got established infrastructure, an established mining area, if they discover that it changes that company from having a five-year profile of 15,000 tonnes per annum of copper, to potentially pushing out to 20 years at 30,000t,\u201d Hoff said.<\/p>\n \u201cWe don\u2019t have too many of those stories.\u201d<\/p>\n Along with WA1\u2019s success in the frontier West Arunta region, Hoff is also watching neighbour Encounter Resources (ASX:ENR)<\/a>, which has shown early signs it could find something of note at its nearby Aileron project.<\/p>\n \u201cEncounter resources is another name that could stand out,\u201d he said.<\/p>\n \u201cThe results that they\u2019ve had, they\u2019ve got a few sniffs around the niobium.<\/p>\n \u201cObviously they don\u2019t have quite the scale that WA1 has got right now, but they\u2019ve got some ground up there with some targets that I think people could probably have a look at and have a think about.\u201d <\/p>\n \u00a0<\/p>\n <\/span>\u00a0 The post MoneyTalks: How Canaccord\u2019s Tim Hoff hunts for explorers in a market sapped of confidence<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"Stay a little longer<\/h2>\n
Majors investing in battery supplies<\/h2>\n
Who\u2019s got a bit of potential?<\/h2>\n
Tim Hoff\u2019s explorers share prices today<\/h2>\n\n
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