ASX Sentiment Turns Bearish, But the US Critical Minerals Story Stays Bullish

It’s now week 3 of the sentiment pullback in small ASX stocks.

Greed changed to fear.

But what has really changed in the bigger scheme of things?

Just because some Australians who invest in small cap ASX stocks suddenly “felt different emotions” and collectively decided at the same time to take some money off the table, and small ASX stocks took a hit...

Doesn’t suddenly mean that the GLOBAL macro themes behind these stocks have changed...

(certainly no comfort for short term “traders” who got caught with their pants down, but we take a multi year view here)

The US is still running hard on securing domestic critical minerals supply.

(We listened to the the USA’s rare earths mining and advanced magnet production “national champion” MP Materials’ Q3 earnings yesterday and they were peppered in Q&A time about what they are doing to secure heavy rare earths supply to feed their new advanced magnet plant - more on this in a second)

Gold and silver are both still at near ALL TIME highs and have been trading sideways since the pull back from their peaks a few weeks ago.

50 year silver:

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.

Yes - the “50 year generational cup and handle formation” is still on.

And here is a 30 year gold chart:

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.

If you had told us at the start of this year that silver would be US$48/oz and gold would be US $4,000/oz by the end of the year we would have been very happy.

China just announced NEW export rules on antimony, tungsten and now also... silver

Nine days ago Trump and Xi met and announced a “12 month truce” in the USA-China trade war...

It appears that part of the agreement was that China would pause “some” export controls on rare earths for 12 months...

China: But you didn’t say anything about antimony, tungsten or... silver

36 hours ago this release started doing the rounds in our Whatsapp - it was published on China’s Ministry of Commerce foreign trade department’s official website announcing new export rules on antimony, tungsten...

And now SILVER too:

(the release is in Mandarin, the English translation below is by Google Translate)

(Source: Official statement (Chinese) , English translation, plus here’s a Chinese English language media article about it)

It has started to be picked up by some media but it's not the mainstream yet:

(source)

“And so the game of export whack-a-mole in the second World Trade War continues:

Today the US is getting rare earths (at least until Trump has another Truth Social meltdown), but just got stopped out on other, just as important materials.

This export control rotation will continue until the day the US is self-sufficient”

(source)

While they are not direct export controls, it appears that China definitely wants more oversight on the flow of antimony, tungsten and silver exports.

One big winner from this news is our Investment RML, that recently secured a tungsten processing mill and historic tungsten ore stockpiles at their Horse Heaven project in Idaho, USA, giving them immediate access to and future domestic US production capability for tungsten. (read our update on that news here)

The even bigger winner in our Portfolio was SS1, who has a giant 480 million ounce silver equivalent (estimated) deposit with antimony running through it in Nevada,USA.

SS1’s giant silver resource also has antimony running through it which looks like it can be produced as a byproduct of mining the silver.

This week SS1 continued the re-assaying of historical silver drill cores that were NOT previously assayed for antimony have returned antimony from surface (read our update here).

(antimony is critical for making bullets, missiles, tanks and all sorts of important military uses. The USA has the biggest military in the world but zero domestic antimony supply)

As of this week, US investors can now directly trade SS1 shares after SS1 listed on the US OTCQX market on Thursday - the stocks code is SSLVF and you can track US trading here.

Almost on cue... yesterday the USA officially added silver the US critical minerals list

On Friday morning, silver was officially added to the US critical minerals list.

(Source)

Critical minerals status means silver projects inside US borders open up to potential government support from places like:

• Department of Energy (DoE),
• Department of War (DoW),
• Development Finance Corporation (DFC), and;
• Department of Interior (DOI).

In fact, it was the Department of Interior which made the change for silver. (Source)

The DoI was the organisation our Investment Locksley Resources (ASX:LKY) was engaged with before receiving a US$191M commitment from the US Export Import Bank (EXIM). (Source) (Source)

With silver now on the critical minerals list, the likelihood of a domestic USA silver project getting federal support is now a lot higher.

(Source)

Now over to rare earths...

The USA’s great hope for rare earths mining and advanced battery production, MP Materials, confirms they need new supply of heavy rare earths in Q3 earnings call Q&A

We listened to the MP Materials Q3 earnings call yesterday.

MP Materials is the US rare earths “national champion” with the only producing rare earths mine in the US, and plans to build an advanced magnet production facility.

MP was also the first receiver of a US$400M direct equity investment from the Department of War and a US$500M offtake deal from Apple.

MP Materials’ mine has plenty of light rare earths, but advanced magnet production also needs HEAVY rare earths.

... and the “10X advanced magnet production facility” that MP plans to build with the funds from the Department of War will mean MP needs to find heavy rare earth feedstock very soon...

As with most investor calls we sit on - the juicy stuff that the company probably doesn't want to lead with started getting asked about during Q&A time.

The very first question on the call was from JP Morgan... asking what MP Materials is doing to secure the heavy rare earth supply it needs to feed its advanced magnet production plant (listen to the question and answer here).

The third question was from Bank of America was also about MP’s heavy rare earths supply (listen to this question and answer here).

And another question on price floors for heavy rare earths (listen here).

There were many more too - the best way to read them all is go to this full transcript of the call and search for the word “heavy” - full call transcript.

We have been pointing out for months that MP Materials’ rare earths mine has plenty of light rare earths, but is lacking in HEAVY rare earths which are ALSO needed to produce advanced magnets.

And is why we added two heavy rare earths exploration stocks, both in driving distance to MP Materials - LSR and PNN.

Here is where LSR and PNN sit relative to MP Materials:

We also have another Investment LKY, with ground directly next door to (and some even inside of) MP Materials' ground. LKY has also mentioned its project is prospective for heavy rare earths. LKY is scheduled to drill test this asset next month.

Here were some of our broader key takeaways from the MP Materials earnings call (you can listen to it in full here):

• MP expects to have its heavy rare earth separation circuit producing full-scale advanced magnets by the end of 2025.
• MP expects to have a NEW new heavy rare earth separation facility developed in mid-2026...

As we said earlier, management were peppered with questions about securing heavy rare earths supply during the Q&A section of the call, management commented on two things:

1. MP is stockpiling heavy rare earths concentrates right now - the plan is to be able to tap stockpiles in the first few years of magnet production so they aren't limited by their mines' low levels of heavy rare earths.
2. MP is actively looking for third party supply - management were clear in confirming third party feedstock processing deals as a way of filling its advanced magnet production plant...

Management even stated that MP is “actively engaging new suppliers, planning to integrate several over time”...

Again, the best way to get a read on the heavy rare earth situation at MP is to open the full transcript of the call and search for the word “heavy” - full call transcript.

We want to see LSR and PNN (and LKY) quickly extract and process bulk samples of heavy rare earths and prove the samples can work as feedstock for MP Materials.

And in parallel drill out their projects to (hopefully) find enough heavy rare earths to be in contention as a potential third party, domestic and nearby heavy rare earths ore source for MP Materials.

We think the broader US markets are yet to fully catch on to the US critical minerals investment thematic.

Our “playbook for small ASX stocks advancing US critical minerals projects

We have put together a “US playbook” of things we think these small ASX companies can do to work their USA assets into existence.

Here is the playbook we will be following for our US Critical Minerals Investments (SS1, JBY, RML, LKY, PNN, AW1, LSR and PFE):

⬜ own or acquire a US based critical minerals project

⬜ appoint Washington lobbyist

⬜ spend time in USA or appoint US based operations person

⬜ appoint experienced, big name advisors or board members

⬜ list on the US OTC market

⬜ commence NASDAQ or NYSE listing process

⬜ acquire, license or partner with downstream processing technology

⬜ deliver early metwork and processing of bulk samples, ahead of drilling

⬜ prove samples can be processed - deliver down stream product

⬜ secure US government funding

⬜ attract interest from private US investors

⬜ outline plan for small, cheap and fast mine

⬜ deliver drilling success on project (doesn’t need to be huge), just commercial for a small mine

⬜ use larger market cap to bolt on later stage/advanced projects in the USA

⬜ list on major US exchange

⬜ US investor roadshows

⬜ deliver domestic US critical minerals supply.

The more of those boxes the small companies can tick (and quickly), the better (we think) they can position themselves to capture US capital and attention.

~6 weeks left in the (trading) year - where we are looking to Invest next

Maybe one more new Investment for this year... maybe.

After the recent market barf we are now focusing on finding some beaten up stocks in out of favour macro themes where valuations are bombed out.

Think biotechs, oil and gas and even good old battery materials...

One sector in particular where we are seeing a lot of undervalued (in our opinion) stocks is oil and gas exploration.

Many plans to drill wells have been pushed out, until sentiment might improve for the sector.

Almost every well that was planned for 2025, has been delayed or slipped into 2026.

Whether or not they get drilled in 2026... that is also not guaranteed.

Most of these companies are trading at market caps where their valuations don't justify raising capital and taking a risk on drilling a well.

(will the market even care right now if they make a new discovery?)

Most companies are now angling for farm-outs because equity markets are tapped out on capital raises for drilling.

Oil and gas companies with market caps of $15M just aren’t able to raise A$30-40M to bring a rig on site and drill.

And the mid cap oil and gas companies are so few and far between that the micro caps are being forced to chase the supermajors...

Supermajors move slow and don't really go after anything that isn’t truly big in size...

That’s why we are looking to add an oil and gas stock (or two) to the Portfolio in the coming months.

If you have any suggestions, we are keen to take a look, please send them through.

Have a great weekend,

Next Investors