ASX Miners Catching US Attention

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Commentary: Week 3: small cap bull market looking pretty good, in the right places. Silver also on run. What will sustain the next ASX small cap bull market over the longer term - here’s what we think...

Three weeks ago, we predicted 6 things that would help start a bull market for small ASX stocks.

We also predicted a bull market would be led by precious metals and US critical metals.

Sentiment is feeling pretty good out there right now, for the first time in a long time.

On Monday night, silver hit a new 14 year high, and importantly has stayed there - and small silver stocks delivered some great price runs during the week.

The US critical metals theme also delivered some big news that got ASX stocks with US based critical metals projects moving, especially this week:

USA rare earths producer US$10BN MP Materials announced:

• The US Department of Defence (“the Pentagon”) invested US$400M and is now MP Materials largest shareholder (source)
• JP Morgan & Goldman Sachs committed US$1BN in construction financing.
• Then it was Apple (yep, the $3 trillion dollar iPhone maker) with a US$500M offtake agreement. (source)

These deals made mainstream US news, and the usually “mining shy” US investors are now starting to catch on to the US critical metals story.

MP Materials is up 70% in the last couple of weeks, and was STILL rising overnight, up 5%:

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

These are big jumps over the course of a few weeks for a US$10BN company.

Will the “onshoring US critical metals” theme grow into the next “battery metals for EVs” style bull run for ASX stocks with US based critical metals projects?

This is what we are currently watching closely for.

The other big US based critical metals company we are watching is Perpetua Resources, who currently have the biggest antimony resource in the USA (“currently”... cough, cough SS1) and a pretty big gold resource too.

US$1.8BN capped Perpetua was up 16% in the last two days on NO news.

It was up 8.25% just last night... again - big daily moves for what is a US ~$2BN company:

But remember - the past performance of any stock is no indicator of future performance.

Our $43M capped (pre transaction) Investment Resolution Minerals (ASX:RML) is literally right next door to Perpetua and is just weeks away from drilling the gold-antimony-tungsten-silver project it is acquiring.

(RML’s project already produced antimony during both World Wars, and the company also recently appointed Perpetua’s former head geologist)

It looks to us like RML share price has been responding well to Perpetua’s share price run, MP materials news and share price run, plus general US (and Australian) investor interest starting to come into the US critical metals space over the last few days:

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

We are counting down the days to when RML lists on the US OTC market, and can hopefully catch some of that growing US investor interest in Perpetua.

We are also looking out for RML’s project acquisition completion, set to occur at the end of the month, then RML plans to drill test its key targets in early August.

Read our latest RML deep dive note from this week here.

The other company we have compared to Perpetua a few times over the last 12 months is Sun Silver (ASX:SS1), over in Nevada, USA.

Like Perpetua's giant gold resource that has antimony running through it, SS1 has a giant silver resource that MIGHT have antimony running all through it...

It definitely has some antimony in it, the big question is just how much. We will find out in the coming months as SS1 retests more of its historical drill holes for antimony - 5 out of 5 so far.

SS1 also delivered a decent share price run this week, possibly as its starts to be seen as a USA silver AND antimony story:

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

Or maybe because SS1 has a 480 million ounce silver equivalent resource estimate and the silver price hit new 14 years highs during the week... and stayed up:

Silver price over last month:

Silver price over 25 years:

Remember though, commodity prices can be volatile and go down as well as up. The past performance is not an indicator of future performance.

On Friday SS1 announced that while they were re-testing 5 of their ~200 historical holes for critical military metal antimony, it also turns out that ALL FIVE retests showed at least 20% higher silver grades too.

So there is a chance that the 200 historical drill holes that make up SS1’s 480 million silver equivalent resource estimate could all have silver grades that have been under-reported by at least 20%.

Of course - that’s no guarantee, SS1 is only in the early stages of this testing - there’s lots more work to do.

Read our update on this potential 20% increase in SS1’s silver resource here

A rising silver price generally brings interest into silver stocks, and our Investment Mithril Silver and Gold (ASX:MTH) also moved up this week:

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

MTH already has a defined 373Koz gold and 11Moz silver JORC resource estimate that it's aiming to double this year.

MTH is drilling 35,000m in 2025, and just raised ~A$12.5M from Canadian markets (which comes with 4 month mandatory escrows on placement stock).

With the cap raise locked away, MTH is bringing on a THIRD drill rig.

The silver price run sets the stage for MTH to potentially repeat what it did last year...

Last September, MTH hit “the big one” - a 7 meters at 144g/t gold, 1,162g/t silver intercept.

Read our full MTH update here.

We think the silver price is going to keep rising over the coming month - check out this video for an interesting bull case on the silver price.

(We could also be wrong though - that’s the nature of markets...)

Another notable US based mover and case for the return of investor sentiment to the ASX market is AML3D (ASX:AL3).

AL3 is our only exposure to the “rebuild of the US domestic economy” - the company sells 3D printing systems, 3D printed parts and software into the US to customers like the US Navy, Austal and Boeing (as well as many more).

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

Another mover is our battery and critical minerals recycling Investment IonDrive (ASX:ION) is up by over 250% from our Initial Entry Price of 1.4c per share.

We think ION’s rally (as well as the broader rally in recycling tech stocks, especially MTM with its US critical metals focus) is because the market is catching onto the fact that these companies will be needed in a bifurcated global metals market...

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

While a couple of our stocks in certain “emerging sectors” moving up over the last few weeks doesn’t make a bull market (and we also note that these stocks may go back down too) we do take it as a good sign that investor interest is starting to come back to the small end of the market.

We think the next long term big bull market in small ASX stocks is going to be led by US capital moving into metals and mining.

Much like the Artificial Intelligence (AI) rush created new tech and microchip monsters, we think US capital will next turn its attention to critical metals and mining.

We take the share price rises of Perpetua and MP Materials over the last couple of weeks (and overnight) as early signs of US investor interest coming into the US critical metals and mining space.

At the same time, a US debt addiction that's putting pressure on the USD as a reserve currency will mean precious metals like gold and silver could also become of interest to US capital.

The ASX has a “head start” across both critical metals and precious metals projects based in the USA

The ASX has always been obsessed with metals and mining - most of our listed companies are in this space, and our investor base understands and invests in it.

(ask any struggling ASX listed tech or biotech CEO)

The USA’s stock exchanges are just not that into metals and mining... yet.

What this means is that many early stage metals and mining projects from around the world find their way into the enthusiastic capital pools of the ASX.

(including many US based critical metals projects, that until recently probably couldn't find enough interest to raise money and list in the USA)

The ASX is home to some of the world’s biggest mining companies - and some of the richest people in the country made their fortunes in mining.

Which means capital markets have always been open and ready to fund entrepreneurs in the metals and mining space.

(In the same way that in the US Silicon Valley is willing to fund tech startups, where Elon Musk, Mark Zuckerberg and Bill Gates all made their fortunes).

So is Australia and the ASX the “Silicon Valley of the mining industry”?

We think it has a pretty strong case for it given the wealth creation that has happened here and the number of successful mining companies on the ASX and fledgling small caps it seeds and supports.

The USA investor pool appears to be only just catching on to metals and mining, and we think that a wave of capital coming out of the US will trigger the next bull run in ASX metals and mining stocks.

Including dual listings onto US exchanges and the US OTC markets.

(We have already seen NASDAQ listed Snow Lake Resources buying majority positions in small ASX companies with US based critical metals projects - including our Portfolio companies RML, GUE, and GTR)

So what happens when USA money wants to start moving into US based critical metals projects?

US financial markets are giant - NVIDIA’s market cap alone is bigger than the top mining companies in the world combined.

(Source, Mining.com October 28, 2024)

We hope to see some of these US funds start cycling into metals and mining.

For the last ~2-3 years, the US has been dipping its toes into the metals sector with small scale grant funding, a few small purchase orders from mining companies and some debt commitments for some of the bigger projects in the country.

The Department of Defence and tech giant Apple, have made big moves into US-based rare earths this week...

MP Materials secured a US$400M invested by the DoD and a US$500M offtake agreement from Apple...

Things we are watching and going to talk more about over the coming weeks:

• US investor interest in critical metal stocks
• US market dual listings of ASX stocks into US markets
• More US government support of critical metals
• More US industry moving into critical metals
• US stockpiling critical metals

And of course, we will be monitoring stocks that have exposure to all/any of these.

So it’s been a good start to the “new financial year bull market” so far, let's see what happens next week.

Have a great weekend,

Next Investors