Where does one look for the best investment opportunities during a cyclical mining downturn?
A good place to start is new-age commodities that are going to be most relevant to the next 20 years of tech driven industrial growth.
Think of lithium and graphite which have burgeoning demand for batteries and advanced materials and plenty of market interest as a result.
At the Next Mining Boom, we’ve been following a resource company that is firmly in this category, with the world’s largest undeveloped economic deposit of a specialty new-age commodity that is used to produce high strength steels for high tech applications.
The market for this commodity is substantially larger than lithium and it is growing at about 7% per annum.
For the last 40 years there has only been 3 mines world-wide quietly producing the commodity and making a lot of money for their owners.
As a result, the price of this commodity has been remarkably stable – it’s a club deal.
The largest producer is owned by one of Brazil’s wealthiest families and this commodity is making a small fortune for them every year, if you call $600m profit per year a small fortune!
It’s all under the radar and that’s the way they like it.
This ASX listed company is now ready to join this exclusive club.
At the same time, this company’s project is in East Africa and there are political and social challenges to deal with making it a very high risk investment so caution is advised if considering for your portfolio.
This company has just announced the results of its pilot plant test work which proves that a simple, low cost flotation process will work for its ore.
These are crucial results, as favourable metallurgy is the exception rather than the rule in this commodity.
With these results, the race to production is on.
Except it’s not really a race…
There has been no new producers of this specialty commodity in 40 years and there are no other projects vying to enter production.
A Pre-Feasibility Study has already demonstrated an NPV (net present value) of over US$400 million and a cash operating margin of over 50% at current prices.
This is being upgraded to a Definitive Feasibility Study which is due to be released within weeks – providing a neat catalyst for this stock.
The ASX company which owns 50% of this project has a market value of only A$23 million.
The other 50% is owned by a committed partner with deep pockets willing to bring the project into production quickly.
Watch this space…. this project is going into production.
