Weekly Watchlist
Vol 3 - What I'm watching
1. Metals AND miners awaken
Resource speculators across the globe rejoiced this week as the metals complex (and importantly the miners) rose in tandem. Precious metals including PGM’s, gold and silver all look to have broken downtrends whilst industrial metals such as zinc and copper were hitting new highs. Gold miners (GDX) were up a whopping ~21% whilst copper miners (COPX) were up ~12%. Long may it continue… it will be interesting see if these gains stick this week.
2. Tungsten makes the mainstream.. and a new player in town
Tungsten made the mainstream this week being featured in a 45min special from Bloomberg affiliated podcast Oddlots (The Tungsten Market Is Warning of an Upcoming War)… and why not - prices are up 10x in the past year as trade wars and actual wars have shined a light on the importance of this critical mineral.
Local ASX Tungsten miner EQ Resources was up 20% for the week but what might be unknown to many is another ASX Tungsten producer began trading again at the back end of last week - G6M. And the mine G6M own and operate (Dolphin) was the mine mentioned in the Oddlots podcast.
Dolphin has been mined on and off for over 100 years providing Tungsten during many different periods of warfare. How does a mine in such a remote location make economic sense? Well other than the Tungsten price - Dolphin has grades nearing 1% WO3 (tungsten trioxide), which is some five times the grade that EQR (and the industry at large) is mining.
I took a speculative position in the company early in the week but couldn’t resist clipping a 35% return in 2 days. The stock is extremely illiquid but this may resolve some time in the near future so I think it’s worth doing some work on it. My rough math suggests it may be able to produce around 70% of what EQR is aiming to produce at similar or lower costs and trades at just 40% of the price tag. Grade is king.
A word of caution though - speculating in these small niche metals is extremely risky… small amounts of capital and volume can come in and crush a cycle. And China pulls all the strings in these markets. I have no edge in understanding Chinese policy - I lean on folks like Teo who writes on here under Red Earth Intel who is all over Chinese policy.
3. A forgotten royalty play with near term catalysts?
Speaking of illiquid stocks… the guys at Money of Mine rarely miss anything when it comes to the resources space and they highlighted in their Word on the decline segment earlier in the week a fascinating royalty set up at $FZR.AX (Fitzroy River).
I first came across this play from a criminally underfollowed account on Substack and X called Little Trees Capital and I’ll link to their Substack article on the stock below which will give far more detail than my quick overview.
FZR is a A$25m company that holds a few small royalties that pay the bills and two large royalties that may do far more than that. The first of these is a royalty on the Snowy River gold project in New Zealand. It’s a ~3% royalty on a ~60kozpa project which will start producing in just a few months (targeting first pour in December). At spot gold my math says this is worth A$11m per annum (!) and the mine has a defined life of 11 years with very high probability of extending much longer (especially given their $45m exploration budget this year). This could easily sell for A$70m+ in my books but there’s a catch..
The situation is the mine owner (Endura) had an option to buyback the royalty for just A$13m.. but they needed to do so within 20 business days of a “decision to mine”. Endura only exercised the buyback option in March this year but FZR argues they had reached a decision to mine mid last year and were even broadcasting this on social media… so they argue the 20 day buyback period lapsed and the option expired.
The companies are now in the High Court of New Zealand contesting the validity of the buyback option. What we do know is at a minimum FZR will receive A$13m and perhaps with a favourable ruling this could be closer to A$70m+. But I agree with Little Trees Capital here that perhaps the more likely outcome is an out of court settlement for a figure somewhere in between.
The second key royalty is ~1% of revenue (~2% until the first $5m) on the Bowdens silver mine in NSW, Australia. The owner of the mine Silver Mines (SVL.AX) published a DFS on the project two weeks ago showing a highly economic mine that will produce 4.7Mozpa of silver for the first 5 years and then stepping down to ~3Mozpa. At A$100/oz silver prices (US$70/oz)… this could yield A$4m pa and given it has a multi decade life could in itself be worth the market cap of FZR. Last week FZR appointed advisors Argonaut to help monetise this royalty and as the MoM crew suggest: why test the market for the value of Bowdens right now unless you’ve been bid yourself?
The risk I see is the court rulings on Snowy River come out against FZR and they only receive A$13m… AND that Bowdens can’t be sold (maybe as NSW permits remain a hurdle). But the odds of both of these events occurring seems fairly low to me. Additionally - the share register and historical capital management of the company should put to ease any concerns on mismanagement of any proceeds. Maybe one worth doing the homework on..
Here is the Substack with far more detail on the set up:
4. Domestic Gas - the local whipping boy
It seems the Australian governments favourite pastime is kicking local gas producers and explorers in the nuts. What was setting up as a somewhat promising environment for East Coast gas producers and explorers given the rapidly declining fields of Bass Strait along with a forecast for added demand for gas as a transition fuel for the electricity market has been turned on its head. First the government provided a sweetheart deal to Origin to keep the country’s largest coal power station online… and then they set up the Cheaper Home Batteries program - to subsidise the cost of [Chinese] batteries to residents to the tune of A$8bn of taxpayer dollars. In addition this week the government expanded the ~20% roof top solar subsidy from 100kW to 1MW [Chinese] systems and to boot Chris Bowen is now looking to force all data centres being built in the country to be powered by renewables [China] and not gas.
But if those acts weren’t enough to crush the demand outlook for local gas and put a halt to gas exploration & development then the proposed action to force the Gladstone LNG facilities to sell 20% of their exports to the domestic market surely will. There’s ~2,000PJ/yr (~1.9bn mmbtu) of gas produced on the east coast each year of which ~1,500PJ is exported out via the LNG facilities in Gladstone and the rest (~500PJ) consumed domestically. Not much is known yet on the mechanisms of this proposed domestic reservation - whether it applies only to uncontracted supply (~95% of LNG is under long term agreements with companies from Japan, Korea, China and the like) and whether it is a forced sale or “made available”. Government appear to be in a mood to strong arm the gas industry into oblivion and there is potentially a case where you could have 800PJ/yr of gas supply trying to find home in a 500PJ/yr domestic market. Prices will surely plummet and gas production come to a halt.
Understandably the gas majors aren’t happy with these policy decisions, especially the fact that they get introduced after all the major capital investment has been spent.
And the gas producers are highlighting the importance of continuing to invest in gas exploration and production…
“Continuing to invest in gas development is critical to domestic energy security, meeting our export contracts, as well as supporting employment and economic activity in regional Queensland,”
Listed gas players on the ASX focused on the domestic market are feeling the pain this year - $QPM.AX which was progressing the build of a gas peaking plant to be supplied with gas from its fields around Moranbah entered administration last month whilst $AEL.AX (-48%), $COI.AX (-36%), $BPT.AX (-23%), $STX.AX (-12%), $ORG.AX (-4%) have all been horrid investments. Some of these have had their own issues such as poor exploration results, difficulties commissioning projects or poor contracts - all risks of looking for and developing gas fields. Even the hot new things in the Taroom Trough are having a hard time of it of late with EXR down ~60% and OMA ~20% in the past month.
Here’s hoping common sense prevails - I’m keeping my eye on some of these beat up gas players because if policy doesn’t assist with encouraging more investment into gas exploration and development then with the fields in Bass Strait (which supply ~300PJ of a ~500PJ domestic market) rapidly depleting we are in for a rude awakening in a couple of years…. But then again maybe it’s best to invest in something like lithium miners that will be a beneficiary of questionable government policy.
5. Glencore to list on the ASX
Glencore is seeking a secondary listing on the ASX, expected to occur later this year. And there’s all kinds of speculation on what the underlying reason for this may be… Bridget Carter with her speculations below…
I’m not sure what the end game is for Glencore.. but as I said in my note Capturing the Arb base metal miners in good jurisdictions trade at good premiums in todays market and Glencore has arguably the best quality America’s focused copper growth portfolio in the market today. Glencore announced EBITDA of US$10bn for 1H26 this week.. and it trades with a market cap of US$90bn.. so is priced at a very underwhelming multiple of ~4.5x.. undoubtedly held down by its coal exposure.
A carve out of the coal business from the copper business makes a lot of sense to me. The market will no doubt pay a premium for the America’s copper business and an ASX listed Australian coal business with the below financials harvesting cash and paying fully franked dividends would likely be well received. And as Bridget suggests GlenCoal is likely the only coal business that could swallow the entire BMA business on its own (which is supposedly up for sale… or not). Watch this space perhaps.
6. Copper Miners - The new tech stocks?
With new supply issues like the below popping up every other week combined with unsatiable demand from data centres, EV’s and broader electrification… is it any wonder copper is hitting all new time highs this week?
The big South American Porphyry’s are now printing margins usually only reserved for tech stocks with large moats (yes - these mines are capital hungry and take forever to develop). This week saw some copper mines report their 1H26 results - and as you can see below there are some making 80% margins (!). It’s no wonder the majors are falling over themselves to buy the best quality porphyry’s.
With perhaps an additional US$20bn+ of margin coming to the big miners versus last year - I imagine some of this windfall will need to make its way down the chain into the juniors and developers.
All the best out there
Respeculator
**Disclaimer - this is NOT intended as financial advice - before acting on any information, you should consider the appropriateness of the information provided to your financial situation and seek advice. Whilst every effort is made to ensure the accuracy of data provided there’s a good chance inaccuracies exist. This is opinion only.**
Insightful as always Sir Respeculator
Excellent, thank you Sir!