In February, Western Australia took the top spot on the Fraser Institute’s yearly survey of best jurisdictions for mining investment. South Australia took the number six spot.
The Canadian think tank uses several criteria to determine the most hospitable locales for mining investment. The annual list is often a precursor to increased mining activity in top-ranking regions.
“The mining survey is the most comprehensive report on government policies that either attract or discourage mining investors,” said Ashley Stedman of the Fraser Institute in the report.
“A sound regulatory regime coupled with competitive taxes are key to making a jurisdiction attractive to investors,” added the senior policy analyst.
Australia’s resource sector has a longstanding history that has asserted the nation as the leader in alumina and tantalum output. The country is second in terms of uranium, lithium and zinc, and is a formidable producer of iron ore, diamonds and gold as well.
A recent capital markets release from Canaccord Genuity lists 14 Australian stock picks. It’s no surprise that the rundown includes three mining companies that are well known in their respective sectors.
Below the Investing News Network lists the three resource firms with a brief overview of their recent activity. All company details were accurate as of August 18, 2020.
1. Paladin Energy (ASX:PDN)
Market cap: AU$283.9 million; share price: AU$0.14; year-to-date move: +45.8 percent
Uranium miner Paladin Energy owns a 75 percent stake in the Langer Heinrich mine, located in Namibia. Operations at the open-pit mine were suspended in 2018 due persistently low uranium prices.
That all changed this year as the spot price for the energy fuel finally broke free of its price rut and began gaining value. With prices holding above US$30 per pound for the first time since early 2016, Paladin has commenced restart efforts at the Langer Heinrich.
In its announcement, the ASX-listed miner outlines an ambitious 17 year plan for the mine, noting the effort will cost US$81 million. In addition to the Namibian project, Paladin also has a portfolio of several uranium exploration assets in Canada and Australia.
Considering these factors, Canaccord selected Paladin as its top pick for uranium exposure, citing its US$400 million of sunk infrastructure and short lead time.
“We believe (Paladin) provides the greatest torque of its ASX peers to a rising uranium price, a commodity that is up 33 percent this year and has momentum, in our view,” reads the report. “Almost a decade of under-investment and increasingly rational producers have highlighted supply side frailties, and this has been compounded by COVID-19-related mine shutdowns.”
2. Resolute Mining (ASX:RSG)
Market cap: AU$1.4 billion; share price: AU$1.34; year-to-date move: +9 percent
Gold miner Resolute Mining has three production assets located in Africa: Mako in Senegal, Ghana’s Bibiani and Syama in Mali. Despite the challenges brought on by COVID-19 lockdowns, Resolute reported no impact to its latest quarterly output.
“Production of 107,183 ounces of gold during the June quarter meets our expectations and results in year to date production to 217,946 ounces, placing the company in a strong position to deliver our full year guidance of 430,000 ounces,” said John Welborn, CEO and managing director.
Other developments during the quarter include a new emissions-reducing power grid at Syama, as well as continued exploration for life-of-mine extensions.
Calling Resolute a “sector leader on a relative and absolute basis,” Canaccord highlights some of the company’s financials in its report.
The firm points to the difference between its free cash flow yield of 21 percent — well above the sector average — and its current price to net asset value of 0.51x, which is considered low. “A successful ramp-up at Syama could lead to a closing of this valuation gap, in our view,” states Canaccord.
3. St. Barbara (ASX:SBM)
Market cap: AU$2.4 billion; share price: AU$3.55; year-to-date move: +30.3 percent
Multinational gold miner St. Barbara has projects in Australia, Canada and Papua New Guinea, as well as a portfolio of exploration assets.
In its most recent quarterly update, the gold company reported 108,612 ounces worth of production.
“The year ahead is an important one for our business,” Craig Jetson, CEO and managing director, said in the release. “Our mature operations, Leonora (Australia) and Simberi (PNG), are entering new phases and Atlantic Gold (Canada) has a strong project pipeline that we intend to realise.”
Additional work accomplished during the period includes completing the final vent shaft of the Gwalia extension project at Lenora, a point that is cited in Canaccord’s overview of the miner.
The company’s production rate, development plans at the Atlantic project, as well as the spike in the gold price and St. Barbara’s valuation in relation to its peers, are all mentioned as providing price appreciation in the future.
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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.