5 ASX Investment Ideas in a COVID-19 World

Canaccord Genuity has shared its best investment ideas for resource investors looking for opportunities during the COVID-19 pandemic. 

The world continues to face uncertainty brought by the impact of the COVID-19 pandemic, with investors trying to look for cues as to where the markets are going and how to manage their portfolios in the current economic climate.

For Greg Galton, Canaccord Genuity’s director of private wealth research, the question investors should be asking right now is not so much if a company is earning less this year, but whether the impact of the coronavirus will decrease its value moving forward.

“Ideally investors should look to own a portion of their portfolio in ‘all-weather’ businesses where the impact of economic externalities on the value of the business is minimal,” he said in a recent report. “These businesses tend to be high quality, wealth creating businesses whose value steadily increase year on year; but importantly this does not mean their earnings must rise every year.”

Canaccord believes Australia has been able to control the impact of COVID-19 effectively in its initial stages, which indicates that it might be well-equipped to handle any future developments and may be in a better position than other countries to recover from the economic crisis.

“While the federal government has offered a significant stimulus package to alleviate the strain on the domestic consumer and employment market, there remains a very high probability that Australia will experience a recession for the first time in 30 years,” Galton’s report to clients reads.

According to the firm, Australian resource stocks are better positioned now than they were heading into the financial crisis of 2007 to 2008, and should outperform on a recovery in global economic growth.

Below is a list Canaccord’s five best investment ideas for resource-focused investors looking for opportunities during the uncertainty of the COVID-19 pandemic.

These ASX ideas reflect stocks that Canaccord believes possess high-quality characteristics, are trading at a discount to the firm’s fair value estimate and are currently exhibiting positive price momentum. All stats and data included were current as of April 29, 2020.

1. BHP (ASX:BHP)

Current price: AU$31.12; year-to-date movement: -20.1 percent

Mining giant BHP extracts and processes minerals and oil and gas with a focus on Australia and the Americas. Its commodities business includes everything from copper to potash.

On April 21, the company released its operational results for the nine months ended March 31, saying it has implemented extensive measures across its operations to keep its people and communities safe from COVID-19. Among other things it has deferred non-critical activities and restricted travel.

BHP, which is still reviewing its guidance for the year, but has already warned it will be lower than the expected AU$8 billion, reported a strong financial position and said its capital and exploration expenditures are flexible at this time.

2. Alumina (ASX:AWC)

Current price: AU$1.54; year-to-date movement: -33.04 percent

Victoria-headquartered Alumina is focused on investing worldwide in bauxite mining, alumina refining and selected aluminium smelting operations through its 40 percent ownership of Alcoa World Alumina & Chemicals (AWAC), which has a production capacity of approximately 14.1 million tonnes per year.

Due to AWAC’s performance in Q1 this year, Alumina received a AU$33.8 million cash distribution, up from AU$27.6 million on the corresponding distribution for the previous quarter.

To preserve cash, Alumina will put all growth capital expenditure on hold for the remainder of 2020, reducing spending by approximately AU$30 million; it will also look to defer a similar amount of non-critical sustaining capital expenditure over the course of the year.

3. OZ Minerals (ASX:OZL)

Current price: AU$8.79; year-to-date movement: -16.92 percent

OZ Minerals is a copper-focused international company that owns and operates: the Prominent Hill copper-gold mine in South Australia; Carrapateena, an iron-oxide-copper-gold underground mine, also in South Australia; and Antasa, a small, high-quality copper-gold mine in Brazil.

In its Q1 2020 report, OZ Minerals said no material production impacts were experienced at its mine sites following the global COVID-19 outbreak, with all operations remaining on track for 2020 production guidance based on current operating conditions.

4. Iluka Resources (ASX:ILU)

Current price: AU$7.17; year-to-date movement: -22.15 percent

Focused primarily on mineral sands, Iluka’s portfolio includes: operations in Australia and Sierra Leone; projects in Australia, Sierra Leone and Sri Lanka; and a globally integrated marketing and distribution network. It also holds a royalty over iron ore produced from specific tenements of BHP’s Mining Area C.

During the current pandemic, Iluka said operational continuity has been maintained, with all mining and processing sites currently operational. In its quarterly review, Iluka also said it maintains a strong financial position, but has withdrawn its previous 2020 guidance.

5. Saracen Mineral Holdings (ASX:SAR)

Current price: AU$4.50; year-to-date movement: 33.54 percent

Australian gold miner Saracen Mineral Holdings holds interests in three mines in Western Australia: Carosue Dam, Thunderbox and 50 percent of the Super Pit.

In its quarterly review, published on April 28, the company reported record gold production of 158,132 ounces at an all-in sustaining cost (AISC) of AU$1,133 per ounce, with production for nine months to March 31 reaching 374,584 ounces at an AISC of AU$1,081 per ounce.

Don’t forget to follow us @INN_Australia for real-time updates!

Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.

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General Manager Matt Herbert described Ontario as an “undiscovered gem,” and spoke about the company’s work on its lithium projects in the province.


After making its ASX debut this past November, Green Technology Metals (ASX:GT1) has been hard at work in Ontario, Canada, where it holds three projects covering 35,000 hectares.

Speaking to the Investing News Network at the Prospectors & Developers Association of Canada (PDAC) convention, General Manager Matt Herbert described the province as an “undiscovered gem” with the potential to contribute to the lithium supply chain in an environmentally conscious manner.

“I think the opportunity there is to create some very, very green lithium,” he said.


“At the moment, a lot of lithium is mined in Western Australia, (then) shipped to China for processing; from China it goes to European battery markets. I think by the time that lithium arrives where it’s supposed to arrive it’s left itself a bit of a carbon footprint,” Herbert explained during the conversation. “We have a real opportunity here to leverage low-carbon lithium in a place that is really screaming for security.”

Green Technology Metals has already seen support from members of the Ontario government, including recently re-elected Premier Doug Ford, and Greg Rickford, who is the province’s minister of northern development, mines, natural resources and forestry, as well as its minister of indigenous affairs.

“Both are massive supporters of critical minerals,” said Herbert. “Those things are important when you’re at the permitting and approval stage, and that’s exactly where we’re at. We’re able to leverage those relationships really well, and there’s just no better place to be at the moment.”

Watch the interview above for more from Herbert on Green Technology Metals and its plans for the next six months. You can also click here for our recap of PDAC, and here for our full PDAC playlist on YouTube.

Don’t forget to follow us @INN_Australia for real-time updates!

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: Green Technology Metals is a client of the Investing News Network. This article is not paid-for content.

The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

Housing the world’s largest deposits of lithium, Chile’s unique geological landscape and climate make it ideal for lithium brine extraction

As the world continues on the path towards a future dominated by clean energy, lithium’s importance only continues to grow. Demand for the battery metal has already reached an all-time high, increasing by 400 percent in 2021. What’s more, there is every indication that this growth will continue in 2022, with prices increasing by 126 percent in just the first quarter.

Currently, Australia and Chile are the two leading producers of lithium, respectively accounting for 46.3 percent and 23.9 percent of worldwide production. Both countries are jurisdictionally inclined to support the mining sector. However, Chile’s potential could one day see it outstrip even Australia where investment is concerned.

Housing the world’s largest deposits of lithium, Chile’s unique geological landscape and climate makes it ideal for lithium brine extraction. The country thus has a pivotal role to play in meeting demand and establishing a stable global supply chain.


A critical component of sustainability

Climate change is an undeniable problem, one which requires a collaborative effort to address. It is for this reason that governments around the world have all agreed to pursue full climate neutrality by 2050. Because combustion engines represent an inordinate percentage of greenhouse gas emissions, replacing them with electric vehicles (EV) is essential if any nation is to achieve their sustainability goals.

Lithium is used extensively in both consumer and professional electronics. It is also a staple metal in multiple other sectors, including mining, manufacturing and energy storage.

Given its cross-sector industrial importance, the battery metal was already in high demand.

The large-scale manufacturing of electric vehicles has caused this demand to increase exponentially. As multiple automotive manufacturers construct gigafactories to ramp up EV distribution, the need for lithium is growing well beyond our current production capacity.

Investors and mining companies can benefit by turning to jurisdictions like Chile to ramp up supply. The world’s migration towards a sustainable future simply cannot occur without lithium.

Lithium: Australia versus Chile

Although Australia houses impressive lithium reserves, the majority of the country’s stores occur in hard rock deposits. Mining these deposits is relatively inexpensive, but hard rock lithium operations also tend to have narrow margins compared to other methods. In particular, lithium brine extraction offers higher yields, greater efficiency and a lower overall environmental impact.

Currently, the largest lithium producer in Australia is Pilbara Minerals (ASX:PLS,OTC Pink:PILBF). Its flagship project, the Pilgangoora operation, is situated atop one of the world’s largest hard rock lithium deposits. It also jointly owns a pegmatite lithium project with Atlas Iron (ASX:AGO), the Mt Francisco project.

Geography represents Chile’s first major advantage over other jurisdictions. Alongside Bolivia and Argentina, Chile lays claim to a geographic region known as the Lithium Triangle. Located in the Andes in South America, it contains an estimated 68 percent of the world’s identified lithium resources.

The Lithium Triangle is home to a series of vast salt flats, beneath which sit incredibly lithium-rich brine pools. More promising still is the climate of the region, which is known for being incredibly hot and dry. This represents a considerable boon for extraction operations, which typically rely on evaporative processes.

A powerful investment opportunity

Chile’s mining sector has leveraged its arid geography to great effect. The country’s Salar de Atacama salt flat is the largest-producing brine deposit in the world. It is also home to several major lithium brine operations.

One of these is owned and operated by Albemarle (NYSE:ALB). Currently the largest business provider of lithium for electric vehicle batteries, Albemarle also operates a lithium carbonate plant at La Negra. According to an Albemarle spokesperson, the company has a long history in Chile backed by a unique contract.

SQM (NYSE:SQM) operates another major lithium brine operation in the salt flat. As the world’s largest lithium producer overall, the company recently announced plans to reduce brine extraction in the region by 50 percent by 2030. This announcement came in tandem with a commitment to reduce water usage across all its operations by 40 percent.

Finally, just south of Salar de Atacama is situated the highest-quality lithium pre-production project in Chile. Maricunga is jointly owned by Lithium Power International (ASX:LPI), Minera Salar Blanco and Li3 Energy. Situated just 250 kilometers from Chile’s coast, and 170 kilometers from the mining town of Copiapo, it’s said to possess characteristics directly comparable to Atacama. Maricunga is also adjacent to Highway 31, which connects Northern Chile to Argentina.

The most significant challenge to Chile’s growth, from an investment perspective, is sociopolitical. Although the country has a history of being relatively friendly towards the mining sector, its current government is exploring new legislation that could nationalize both copper and lithium. A new mining royalty bill is also in the works, which could increase tax rates by up to 80 percent.

It’s worth noting that not every investor considers the current political climate to be a risk. South32 (ASX:S32), a spinoff of BHP (ASX:BHP), recently invested US$1.55 billion to purchase a 45 percent stake in the Sierra Gorda copper mine, and a lithium auction held by Chile earlier this year saw Chinese manufacturing company BYD acquire extraction rights for 80,000 metric tons of lithium.

Takeaway

Chile is home to the largest, richest and most valuable lithium deposits in the world. For many investors, the high margins and low cost of lithium extraction in Chile more than make up for the potential of a few political speed bumps.

This INNSpired article is sponsored by Lithium Power International (ASX:LPI). This INNSpired article provides information that was sourced by the Investing News Network (INN) and approved by Lithium Power International in order to help investors learn more about the company. Lithium Power International is a client of INN. The company’s campaign fees pay for INN to create and update this INNSpired article.

This INNSpired article was written according to INN editorial standards to educate investors.

INN does not provide investment advice and the information on this profile should not be considered a recommendation to buy or sell any security. INN does not endorse or recommend the business, products, services or securities of any company profiled.

The information contained here is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Readers should conduct their own research for all information publicly available concerning the company. Prior to making any investment decision, it is recommended that readers consult directly with Lithium Power International and seek advice from a qualified investment advisor.

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