Catching the Next Wave: LKY, Critical Minerals & Our Portfolio Strategy

What Happened?

Commentary: LKY added to our Portfolio. How macro themes play out over time. What we are planning to do next.

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Yesterday we added Locksley Resources (ASX:LKY) to our Portfolio.

(read why in our LKY launch note here)

We think the US critical metals theme is getting real and want increased exposure to early movers on the ASX, like LKY.

Ever since the “great lithium boom” of 2020-2022, the small end of the market has been starved of a “macro thematic” to bring interest and capital into microcap projects.

Now, a few years later...

The USA’s sudden urgency to rebuild domestic supply chains of metals that are critical for things like AI, robotics and defence has driven early interest into the USA critical metals theme.

(the US critical metals theme was solidified on Friday when the Trump administration said it would use pandemic-era levels of urgency to build out domestic critical mineral supply chains, source).

Global uncertainty, concern around US government debt levels, and the broader global financial system has driven interest into gold and silver as well.

Big macro thematics don't happen often.

But when they do they bring with them a lot of momentum, big crowds of investors and a tsunami of capital looking for exposure in companies that previously nobody really cared about...

(we call it “interest and capital”, basically people being suddenly interested enough in an emerging sector theme to invest in it)

Some companies make the most of the window of interest and the capital that comes with it, rapidly progressing their project and genuinely increasing their value.

Many will try and fail... some for factors outside of their control, others by their own hand.

So what is our Portfolio strategy as a macro theme plays out?

1. Identify a potential macro theme before it becomes popular.
   
   Like lithium in 2019, or precious metals and US critical minerals in 2024. This can be hard as a lot of themes sound good at first look but it's easy to be either a couple of years too early OR just plain wrong.
   
   
2. Make one or maybe two investments before the macro theme starts to become popular.
   
   At this stage, we think it's important not to go too hard just in case we are wrong or years too early (like we were on gold in 2022). For lithium we Invested in VUL and LRS in 2019 and 2020. For US critical minerals exposure we currently have SS1, RML, and now LKY.
   
   
3. Make a few more investments as the macro theme starts to “get real” and gain wider interest
   
   We did a fair few of these Investments with lithium, some did well and some didn’t. Company share prices will have already run a little but still show good value and potential in the current context. Here we also start to see small ASX companies in unrelated macro themes acquire new projects in the emerging macro theme. We will be looking to make some more investments in US critical metals in the coming months.
   
   
4. Macro theme becomes mainstream, companies are flush with cash
   
   At this stage it's down to how well the management teams of our Investments execute and navigate the wave of capital coming into the sector (and a lot about luck too). The best management will take advantage of the investor attention and look to build a real project. Also the time to top slice and take back some of that initial outlay for the Investment as share prices start to run.
   
   
5. Interest in the macro theme starts to wane
   
   Will it be a 6 month run? 1 year run? 2 years? 5 years?
   
   Nobody knows, but interest in macro themes always starts to soften eventually. Hopefully one or two of the Investments used the run to significantly progress their projects and end at significantly higher valuations.

So nobody knows how long a macro theme will run for... it could be months or (hopefully) years.

(remember that 2023 uranium run that only lasted for a few months?)

What we have learnt over the years is that the big ones run for a lot longer than anyone expects, and end a lot quicker than anyone expects.

The outcome we hope for?

That one or two of our Investments can end up doing what VUL or LRS did during the ~2 year lithium run of 2020-2022.

VUL was our best ever investment - up 8,225% at its peak, still trading at over 20x our initial price even after interest left the lithium boom - VUL used the lithium run to become a real and serious lithium project.

LRS was another one of our best - up 2,332% at its peak and was acquired by $5.3BN Pilbara Minerals for ~$560M.

(The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance.)

We were lucky enough to back a couple of big winners (VUL and LRS) - but we also had a lot of smaller Investments run then come back down, and most eventually exit the sector completely into new projects in different commodities.

(RAS, MEG, MAN, SLM, L1M, TG1...)

These cycles are all part of investing in small caps.

Our strategy is trying to gain exposure across a sector before that big wave of capital arrives, which of course is much easier said than done...

We think we are now in stage (3) “it’s getting real” of the USA critical metals theme:

Again, the “we want Operation Warp Speed levels urgency to develop US critical metals” comments from the Trump administration on Friday kicked the US critical metals theme stage from (2) into (3) in our opinion - this happened on Friday.

(Source - Reuters August 1st 2025)

Which is why we plan to add more US critical metals names to our Portfolio over the coming months.

We will still conduct our normal levels of due diligence on any Investment we make, but we are willing to take a little more risk on the earlier stage explorers.

(if an early stage explorer can deliver a material discovery when a commodity is hot, then the market rewards it with buying, as opposed to announcing a discovery when nobody cares about a commodity.)

We think that when the big wave of US capital arrives into the sector, explorers will also see some love.

We have already seen some evidence of this - private US exploration companies are raising cash at valuations that rival some of the biggest mining companies on the ASX...

Kobold Metals for example - backed by billionaires Bill Gates and Jeff Bezos, this private company raised cash at a US$2.96BN valuation... that’s almost as big of a valuation as the ASX’s biggest lithium miner - Pilbara Minerals.

There is definitely some smoke in the US critical metals sector... it just hasn't quite captured mainstream attention... yet.

Our plan is to go into the next 2-3 years with enough exposure across US critical metals that maybe one or two of our Investments can turn themselves into a multi hundred million dollar success.

(there will definitely be some losers, but we hope that the few winners are big enough to pay for those losses and then some - again no guarantees).

This was the exact same play that we ran with the lithium boom between 2020 and 2022.

While many of our Investments didn’t work out, a few outsized returns from Latin Resources and Vulcan Energy Resources were enough to make up for the rest.

So far we have three Investments in the US Critical Minerals thematic:

• Locksley Resources (ASX:LKY) - Rare earths and antimony. (read yesterday’s LKY “our new portfolio addition” launch note here)
• Resolution Minerals (ASX:RML) - Gold, antimony and tungsten.
• Sun Silver (ASX:SS1) - Silver and antimony.

Where will the wave of capital come from?

We have been using a “NVIDIA market cap versus the big miners” image to compare the difference in size of the two respective industries.

(Source, Mining.com October 28, 2024)

Our view has always been that some of the money sitting in the giant green NVIDIA ball would flow into the smaller mining balls.

Even just a small percentage of capital flows would be big enough to create waves.

This week we got another signal this might actually start to happen...

On Friday morning, Reuters reported that the “Trump administration would expand price support for US rare earths projects”.

(Source)

The article quoted Trump’s team as saying that the investments by the Pentagon into specific projects was “not a one-off” and that more similar deals were in the works...

And specifically said the US government would try to build out its domestic supply chains at urgency and speed similar to the development of vaccines during the covid pandemic back in 2021 (ie the most urgent and important thing to focus on right now).

The article also reported that the Trump administration was pushing companies to make the most of US government funding available to them...

AND...

Encouraging the big tech companies to invest in rare earths space directly “either through seed investing or by making buyouts”.

IF the US government can push the big tech giants into the critical minerals space that would mean trillions of dollars in market caps floating around looking at relatively tiny mining companies...

Our latest Investment Locksley Resources (ASX:LKY) - Next door to a company tech giant Apple and the US Department of Defence just did deals with.

Speaking of metals and mining deals with the US government and US big tech...

This week we added Locksley Resources (ASX:LKY) to our Portfolio.

LKY is right next door to MP Materials - USA’s only rare earths miner and the company that only a few weeks ago did a US$400M deal with the Pentagon and US$500M deal with tech giant Apple.

(LKY’s market cap is slightly higher now, the number we have in the image above was based on the 9.5c cap raise price)

Everyone in the US knows who the Pentagon is (the US Department of Defence) and most people around the world know who Apple is.

Which is why we think LKY’s project is next door to one of the most talked about mining companies in the US right now...

LKY has drill permits granted and is drilling this quarter for rare earths and antimony.

Check out our LKY launch note to see:

• The 10 key reasons why we are Invested in LKY.
• The two companies that have rallied next door to LKY.
• The two targets LKY will be drilling this quarter (rare earths and antimony).
• More on the MP Materials story - the USA’s only rare earths mine that has attracted direct investment from the Pentagon and an offtake deal with tech giant Apple.
• How LKY picked up its projects - way before any of the market interest in this part of the world (or in its neighbours MP Materials and Dateline Resources).
• Why we think LKY is in the right place (USA), at the right time (now), in the right sector (critical minerals)
• And of course, our full LKY Investment Memo.

Check out the full note here: Our New Portfolio Addition: Locksley Resources (ASX: LKY)

Our other US Critical Metals Investments

Our two other Investments with exposure to the US critical minerals thematic are Resolution Minerals (ASX:RML) and Sun Silver (ASX:SS1).

Both of which had some decent news this week.

Resolution Minerals (ASX:RML)

Similar to how LKY is next door to MP Materials...

RML is next door to what will become the USA’s only source of antimony supply (and also has US DoD support).

That’s the project owned by $2.6BN Perpetua Resources:

(Perpetua’s market cap is now ~$2.6BN)

Earlier we talked about how we think US capital will flow into critical minerals companies...

This week RML appointed Dominari Securities to lead a NASDAQ listing for the company by Q4 of this year.

Dominari is a US investment bank part-owned by Donald Trump Jnr and Eric Trump.

(Yes, that is Donald Trump’s sons...)

RML’s share price briefly spiked to 9.3c off the back of that announcement.

This RML-Trump news even made it into the Financial Review this week

(it’s a good sign that the small end of the market is starting to come back when the AFR deems the sector relevant enough to wiggle a disapproving index finger while saying “tut tut”.)

(Source)

If that’s the sort of coverage RML is getting announcing its INTENT to list on the NASDAQ with Dominari... we can’t wait to see the type of coverage RML gets when it actually lists on the NASDAQ...

The NASDAQ listing is targeted for Q4 of this year

Sun Silver (ASX:SS1)

SS1 also had news this week, announcing a 7% antimony hit.

SS1’s antimony story is starting to feel a lot more real now, two back to back 50m+ assays with antimony grades higher than Perpetua Resources’ project (the current market favourite for antimony in North America).

Antimony is a critical mineral used in various military applications, like as a hardening agent for ammunition.

The bigger development for us however is that SS1 now has cash to execute on its project.

Previously re-assaying the giant resource for antimony would have been a tough call if SS1 would need to make a call on cash preservation or spending on re-assays.

Now with $10M cash at the end of quarter (30 June 2025) and $30M raised last week, SS1 should have ~$40M to do as much work as it needs on its project.

(Source)

(SS1 is primarily a silver story, and the share price came off mid week after the silver price dropped. Silver came back up a bit last night though.)

Both RML and SS1 are going into a 3-6 month newsflow window where they could deliver major catalysts - hopefully into a market where US critical metals has become even more popular and mainstream amongst the US investor community...

Another sector we have high conviction in - silver and gold

Another sector we really like is precious metals.

We have already seen gold rally by ~100% in the last 18 months and silver hit ~14 year highs.

We think the two still have a lot of room to run yet.

However the past performance of commodities is no indication of the future performance of commodities.

The whole US critical minerals thematic is based around a sense of urgency in re-shoring defence/AI critical supply chains.

The precious metals thematic is slightly different in that it’s a hedge against ever increasing global debt.

Up until very recently, the world has never really thought about US government debt as a big problem - probably because the US dollar is the global reserve currency...

All of a sudden the world is waking up to the fact that the US may struggle to manage those debts... which means currency devaluation and increased interest in precious metals.

Also scepticism about the stability of the current global financial system in general drives interest in precious metals.

We came across this interview with Tucker Carlson and Richard Werner where the two talk about the fragilities of the current economic system.

Werner, who is famous for his work on the Japanese financial crisis of the 1980s, (and his book “Princes of the Yen”) says that:

• The abandonment of gold backing was a historic mistake that enabled monetary manipulation
• Gold served as a natural constraint on credit creation and inflation for centuries
• Current fiat monetary systems enable unlimited money printing and asset bubbles

(It’s a long one - but here is a link to the full interview )

We are bullish on precious metals and will look to add a few more names to our Portfolio over the coming months.

We are especially bullish silver which we think could “do a gold” and go on a generational run to all time highs.

IF that were to happen, we don’t want to sit out the run without having as much exposure on the Portfolio as possible.

(We could also be wrong, there is no guarantee that the precious metals thematic continues to run as it has in the past)

See our explainer on that from last weekend here: Silver FOMO - is the price about to break out? Recipe for the next VUL?

Overall, we think there are still a fair few opportunities in the precious metals space - and especially in the silver space right now.

Have a great weekend,

Next Investors