We're looking at Europe to add to the critical minerals theme

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Markets really sucked this week

Again.

In fact - it sucked so much that after the Beaver Creek Precious Metals conference in Colorado finished two weeks ago, I decided to cancel my flight to Washington DC....

and drive there instead.

Staring at the open road instead of at my laptop screen and likely a watchlist of red for two weeks.

Coming back to the screen today, it looks like I spared myself some pretty depressing viewing.

Instead of seeing good news get sold into, I saw the world's biggest basketball in Knoxville, Tennessee.

Instead of seeing micro cap investors lose hope, I saw the birthplace of Bill Clinton in Hope, Arkansas.

Instead of a graveyard of stocks I visited the grave of Pantera guitarist Dimebag Darrell and drummer Vinnie Paul in Arlington, Texas.

Instead of watching critical minerals stocks fight off going south, I visited the site of a key US Civil War battle in Manassas, Virginia.

After nearly two weeks of driving I saw probably a million cars and trucks go past the other way on the interstate highways - that's a LOT of petrol and diesel (ie oil)

All the way back over in Australia - it looks like people just aren't buying small stocks right now.

I've written in the past that high-risk small stocks are “discretionary spending” for investors.

(meaning when times get tough, that “spending” pauses)

Gold is up 60% since January 2025 - small ASX gold stocks are not catching a bid.

Silver is up 110% since January 2025 - many small silver stocks are back where they started.

(big, producing gold and silver stocks are going up while silver and gold go sideways)

The US Government is going ape to find, fund and develop critical minerals projects - throwing real money at the situation, ASX critical minerals stocks are limping along.

(just this week it deployed $1.5BN for the onshoring of its semiconductor supply chain (source))

While the fundamentals feel right from a macro perspective on gold, silver and critical minerals, the small ASX stocks to play these themes are lagging.

Here’s a quick theory on why even though the macro themes we are Invested in are strong, small ASX stocks aren't responding at the moment.

There is a fundamental reason why a small ASX stock goes up (or not) - more people want to buy and hold than want to sell.

And this is limited to the pool of market participants (in our case Australians on the ASX).

When everyone is feeling rich and positive, they start allocating some capital to small stocks.

The more people that do this the more stocks go up.

When people ARE NOT feeling rich and positive the wallet closes for small stocks - no buying, probably selling too.

So what's going on with people right now?

In Australia, 2 in 3 households are property owners.

2.2 million Australians own an investment property (according to ATO tax filings).

That's a lot of wealth (and emotions and investing self esteem) tied up in property - whether it's in the family home or investment properties (or both)

Now imagine what getting fed these headlines for a few months would do to your “I am a rich, investing genius” mental state:

(source) (source) (source) (source) (source) (source)

I’m not a property guy so won’t try to comment much on why this is happening.

The quick summary is that new tax changes in Australia are making owning an investment property less attractive.

And that lack of investor buying is starting to push property prices down.

Small cap Investors to property Investors:

The AFR this week published a “handy” calculator to see how much cheaper property prices (or how much poorer owners are) are by suburb (source).

Pretty grim reading if your personal wealth is tied to the value of your property portfolio.

Imagine reading a term sheet for a speccy stock when the newspapers are telling you that your property has probably just gone into negative equity...

“I’ll pass thanks, yes even with the 1:1 oppie and 30% discount”.

My point is - the macro themes behind the stocks are all strong - but the interest and buying on the ASX just isn't there at this moment, possibly because the property heavy ASX market participant pool is skittish.

Now here’s the silver lining on the government kicking the property market in the crotch.

Again, 2.2 million Australians own an investment property.

The government's stated logic for the new tax changes is that investors and first-home buyers compete for the same established homes, and tax breaks give investors an edge in that contest.

Taking the edge away should, in theory, give first-home buyers a better shot.

Essentially, the government is making property investing less attractive to create space for first-home buyers.

(even that doesn’t seem to be working as first home buyers are sitting on the sidelines waiting for prices to fall further - source)

Would-be investors will now be more likely to put their monthly “investment property deposit savings” into shares because the numbers on (investment) property no longer stack up.

Now obviously that won’t be into high risk stocks like the ones we Invest in...

BUT

Most share market investors will likely allocate a bit of their portfolio to the spicy end of the market.

And that's where we live.

And the pool of participants in the share market will grow.

And if this “world’s biggest ever commodity boom driven by the AI, robots and advanced weapons build out" that we are predicting happens...

The commodities heavy ASX suddenly becomes a very attractive place to park that diverted investment property cash.

All this tax and property stuff will need time to settle before this happens.

The quicker solution for our small stocks could be to dual list in the USA, and for the CEO/MD to start hitting the investor roadshows in the USA.

The US stock market is raging and everyone currently feels like an investing genius with money to throw around.

(And there are no major tax changes in the US forcing investors to sit on their hands either - surely Uncle Donald wouldn't do that)

Anyway, like any stretch of time in the small end of the ASX (good bits AND bad bits), we think this is just a phase.

And for the macro themes where we think fundamentals are solid it feels like that retracement before a broader rally that is so typical of the small cap market.

First leg up on enthusiasm, then the retracement as some of the frothiness and non-believers cash out.

Then the real move based on fundamentals where some small cap speculative companies become real (and big).

Just like Battery Minerals did with the first run in 2016-17-18, then a big washout in late 2018-2019.

Then the mega rally in 2020-2022 where discoveries were made, new mines brought online and takeovers of micro caps by the bigger guys.

We had Vulcan Energy Resources (ASX: VUL) become our best performing stock ever during that second run.

And another one that was in the doghouse for so long - Latin Resources (ASX: LRS), went on to make a lithium discovery and get taken over by Pilbara Minerals for $560M in an all stock deal.

We are still very bullish on gold, silver and US critical minerals as macro thematics and think this current pullback could be the same thing we saw with battery metals in 2018-2019.

In the West, the US is leading the charge for critical minerals right now, making all the noise and spending all the money

(and US critical minerals has been where we have focused over the last ~18 months)

But the AI race, robot build out and advanced weapons and military build out are not just a “great global powers” problem for the USA and China.

Middle powers are starting to realise that self sufficiency is the way of the future, especially as the USA withdraws from its “World Police” role.

Now the USA is leading the way in the West's “race to reshore and become self-sufficient”.

But with an increasingly brazen and aggressive neighbour Russia in a hot war on its doorstep, we think the European Union has its very own clear and present boogey-man to start racing to re-arm and re-shore as fast as possible.

Well, after a Labour Day holiday and quick siesta of course...

We are getting interested in EU critical minerals

EU critical minerals as a thematic has occupied a part of our brains for a while now. We said this in a previous note from November 2025:

(think of it as USA’s rush to reshore critical minerals supply, just at a more “leisurely” European pace)

(source - our weekend note from November 2025)

We thought the US would be the first to act (and much faster) so we kind of got distracted with everything happening in the US.

The US has gone hard and fast throwing capital around (as they do so successfully when there is urgency and economic motive to do so).

The Europeans do things differently (slowly, with a siesta midway through).

We have probably all seen the memes:

No judgement - the US method works very well and has made the US the global economic superpower for almost a century BUT the Europeans know how to breakfast and lunch...

The US has been urgently throwing muscle and cash around the critical minerals industry for over a year now.

Using its modus operandi to rapidly “get shit done”.

The Europeans to be fair to them - have been pretty proactive at the government level.

BUT most of the work done to date (in typical European fashion) has been around setting aspirational goals and making announcements about supporting the sector.

Nothing concrete to actually support it YET...

Overnight though, the European Commission signed off on 46 new "strategic" critical raw materials projects.

Adding seven lithium, twelve nickel, three tungsten, four rare earths projects to its list of “strategic projects” that now benefit from accelerated permitting and potential access to EU funding deals.

(European Commission)

Three weeks ago, the President of the European Commission, Ursula von der Leyen said:

"We are more than 80% dependent on China for many critical raw materials. 90% for some rare earths... We need to urgently procure and build up our reserves... we will establish a new European Corporation on Critical Raw Materials. It will help us obtain and stockpile what we need."

(source)

All of this is happening a few weeks out from a potential China rare earth export restriction - which comes back into play on the 10th of November unless the pause gets extended.(source)

We have written about it in detail before - but ultimately we think individual countries and regional blocs will have to build out their own military and defence capabilities.

Especially in a world where the USA is signalling a withdrawal from its role as “world police”.

And where the world may look like the scribbled map in the image below (hypothetically).

With each section needing to be fully self-sufficient in its own critical metals supply and manufacturing?

The last time Europe decided it urgently needed to be self-sufficient in a mineral was during the battery minerals boom (for Electric Vehicles) in 2020-2021.

The EU saw Electric Vehicles as an existential threat to its biggest manufacturing strength - the automotive industry - and reacted pretty quickly (by EU standards).

The battery minerals run was dominated by the carmakers coming to the party.

With critical minerals now more of a national security issue

(source) (source) (source) (source)

We think the much deeper pocketed European governments will come to the party on critical minerals/military minerals.

If you have any European critical minerals stocks on your watchlist - tungsten, antimony, rare earths, gallium, anything in the EU's strategic projects list - hit reply and tell us about it.

Also, we are on the hunt for more oil stocks - we think oil is going to be a big story over the next 12 months.

Have a great weekend.

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