29 Metals, Mincor, Lynas, OZ Minerals, Iluka


Ally Selby: Tim, over to you. It has a market capitalization of $ 1.2 billion. And since its IPO in July, its share price has risen nearly 27%. Is it a buy, hold or sell?

Tim Sergeant: Sell, Ally. It’s been a good IPO, but I think there are two issues with it. One is that it was classified as a copper stock, but I think Golden Grove, which is the main asset historically, is a zinc asset. And I think that’s where a lot of the future growth in production comes from. And that has ramifications for its multiple, which you pay for, given the market’s preference for copper over zinc. I also think free cash flow expectations will continue to be disappointing – I think the market is going to be disappointed. And these are both relatively mature assets and more capital intensive than people might expect.

Mincor Resources (ASX: MCR)

Ally Selby: Then we have the nickel producer Mincor Resources. It has a market capitalization of $ 661 million. Tim stay with you. Is it a buy, hold or sell?

Tim Sergeant: Socket. Cassini is a good deposit and I think it can continue to develop. I think the valuation is probably fair because once it increases over the next 12 months you have two companies listed in Wyloo Metals and Independence Group (now renamed IGO) which gives you a trickle of decent security. But ultimately, I think you have to be bullish nickel to be bullish Mincor, and I’m not, hence the hold.

Ally Selby: David to you. Twiggy supports Mincor, doesn’t she? Its share price has risen by approximately 44% in the past 12 months. Is it a buy, hold or sell?

David Franklyn: We have it in purchase. Mincor heads into production from March next year and is expected to produce around 15,000 tonnes per year. And that’s a low CAPEX. Thus, it takes advantage of the BHP infrastructure around Kambalda to go into production quite profitably. I think the benefit comes from the expiration around their Durkin North and Long mines and also their Hartley prospect, which has the potential to extend the life of their mine.

Lynas Rare Earths (ASX: LYC)

Ally Selby: Then we have reader favorite Lynas Rare Earth, which has been described by one of our contributors in the past as one of Australia’s most valuable strategic assets. David, what do you think, is this a buy, hold or sell?

David Franklyn: We have it in reserve for evaluation purposes. It is undoubtedly a strategic asset. It is the only large-scale producer of rare separated outside of China. Mount Weld is a high level level 1 resource. So in terms of asset quality it is checked, but the assessment is not there.

Ally Selby: Tim, over to you. It recently reported record annual after-tax net income of $ 157 million. Is it a buy, hold or sell?

Tim Sergeant: Here, Ally. I agree with all the comments about the strategic option in the business, and it’s handled very well, but I think it’s all known. Prices are on the higher end – at around $ 100 per kilo for NdPr and there is little volume growth in the short term, and we are going through a fairly capital intensive period. So I would bide your time there with Lynas.

Ally Selby: We have asked our donors to bring a stock that they are supporting for the energy transition. David, I’ll start with you first. What did you bring for us today?

David Franklyn: My purchase is OZ Minerals. It’s obviously one of the biggest resource companies, but I think it’s also one of the best. We highly value their management team. They have a great portfolio of assets. They put Carrapateena up and running without a problem and it is producing well. Prominent Hill is a long term asset. These two projects offer possibilities for the expansion of brownfields. They bought West Musgrave at a low price and they got a foothold in Brazil. So we just think it’s really a leading chip in the energy transition space. And it’s a stock you should own.

Iluka Resources (ASX: ILU)

Ally Selby: Tim, can you beat OZ Minerals? What title do you support for this energy transition and why?

Tim Sergeant: I have Iluka Resources, the ticker code is ILU. It’s not yet a battery material stockpile per se, but I think it could be. And that’s why it’s interesting. It is best known for being a leader in the zircon and titanium commodities markets and trades at a valuation of around five to seven times earnings, depending on where you are in the given cycle. But I think if they can develop the rare earth part of their company – which currently sells low quality monazite concentrate to third parties in China.

If they can progress further downstream, which I think they can, and for that to become a higher value, potentially up to a third of their business – we’ve seen the valuations on which materials companies Specialty and Chemicals trade 15-20 times – and if they can have a third of their business attracting that kind of multiple, I think that’s a material rewrite opportunity for Iluka.

Ally Selby: Well we hope you enjoyed this electric episode of Buy Keep Sell.

Buy Keep Sell is a weekly video series produced by Livewire Markets.

Disclaimer: The information in this presentation is general in nature and should not be relied upon. Before making any financial planning investment decisions, you should consult a licensed professional who can advise you if the decision is right for you. Contributors to this show may have commercial or financial interests in the companies mentioned.


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