Boab Metals

Top 5 ASX Mining Stocks to Watch in 2022

Introduction

Investing in the right mining stocks this year can provide portfolio exposure to high-demand resources and increased security against an unpredictable global future. These are our top 5 Australian mining stocks to watch in 2022.

In a time of increased inflation, a shaky US dollar and global unrest, making wise investment choices is more important than ever. And while it’s easy to get distracted by the bright lights and utopian vista of technological investments like shiny new consumer electronics, virtual reality developments (Metaverse, anyone?) and smart, electric cars, it’s important to keep two things in mind. Firstly, that under the surface of every technological advancement lies the need for raw materials – environmentally friendly rechargeable batteries, it turns out, don’t grow on trees. And secondly, that the stability offered by precious metals, resources valued equally from Austria to Zimbabwe, provides a reassuring buffer against the tides of global unease.

All of which brings us to mining stocks. Our picks for the top 5 Australian mining stocks to watch this year cover base metals: abundant, easy to mine and in demand for everything from construction to smartphones, and precious metals: tangible assets that hold their value in an uncertain world. Each of the companies below provide exposure to materials that are in high demand and predicted to grow.

Boab Metals

We’re starting off strong with a company whose combination of resources provides investors with ASX exposure to three highly sought after metals: lead, silver and zinc. Boab Metals (ASX:BML) is an Australian development and exploration company with a focus on the mining and production of base and precious metals. Operating out of the Kimberly region of Western Australia, Boab is a small cap company with a market value of $52.18 million whose recent excellent testing results are sure to inspire investor confidence.

Boab’s flagship project is the Sorby Hills Lead-Silver-Zinc joint venture. With environmental approvals already in place and development due to be completed in Q2 2022, the project is Australia’s largest undeveloped lead and silver deposit. Boab is a 75 percent shareholder of the project, while the remaining 25 percent is held by their partners, Henan Yuguang Gold and Lead Co. Ltd, who are China’s largest lead smelting and silver producer. 

Sorby Hills is located just outside of Kununurra in the Kimberly region of Western Australia – an area with existing sealed roads directly from the Sorby Hills site to Wyndham Port, which will enable fast-tracked production in future. 

Recent testing at the site’s Beta Deposit and Wildcat Target convincingly supports Boab’s updated Mineral Resources Estimate, with grades of up to 7.04 percent lead and 95 grams per tonne of silver at the Beta Deposit and 5.37 percent lead and 21 grams per tonne of silver at the Wildcat Target. 

Sorby Hills is expected to produce 50,000 tonnes of lead and 1.5 million ounces of silver each year over the lifespan of the project – which is currently 10 years, with prospective exploration in place for further potential development. The project is expected to deliver around $2 billion in sales and has already received strong interest from both local and international consumers.

Lead, silver and zinc often occur in the same ores, providing companies the opportunity to mine them simultaneously. All three are globally sought after resources, particularly for makers of electric vehicles.

Despite the rise of lithium batteries, over 70 percent of rechargeable batteries worldwide are still lead-based. Lead is the primary component in V12 batteries, the power source found in traditional and electric vehicles. With the 12V lead battery market forecast anticipating growth of nearly $10 billion in the next decade, market demand for lead batteries is showing no signs of slowing down.

Silver, as the most conductive metal on earth and having a high resistance to corrosion, isn’t just a beautiful and valuable precious metal. It’s the ideal resource for solar cells and the electronic components of electric vehicles, with over 55 million ounces of silver used each year in the electrical connections found in vehicles alone.

Not to be left out of the electric vehicle and battery game, even zinc has been identified as a potential battery material due to its low flammability and high energy density. Zinc’s primary use, however, is still in the production of galvanised steel, an essential material used throughout the construction and transport industries. 

Liontown Resources

Second up is Liontown Resources (ASX:LTR), a highly promising battery metals exploration and development company based in Western Australia. With four wholly owned projects, the mid cap company is valued at $3.11 billion and has a promising future producing lithium products for the growing rechargeable battery market. Liontown is predicted to supply 5 percent of the world’s spodumene – a mineral from which lithium is extracted – by 2024, this impressive figure rising to 6 percent by 2029. The company has recently entered into a deal to supply lithium to electric vehicle megacorporation, Tesla.

Liontown’s flagship project is the Kathleen Valley Lithium Tantalum Project, a globally significant Tier 1 lithium deposit located in the North-Eastern Goldfields of Western Australia. An established mining jurisdiction, the location boasts excellent existing infrastructure, including sealed roads and airstrips, and access to Geraldton Port via the Goldfields Highway. The project’s Mineral Resources Estimate – 156 million tonnes at 1.4 percent lithium oxide – confirms the site to be a world-class lithium resource, while a recently updated Definitive Feasibility Study found the project to be economically and technically robust.

The production timeline of the Kathleen Valley Lithium Tantalum Project places Liontown in a unique position to take advantage of the projected market deficit of spodumene. With early works commencing in Q4 2022, it will be one of the few projects in an advanced enough position to supply the mineral. In its long-term strategy, Liontown has conducted a Downstream Scoping Study that suggests a likely future expansion pathway.

In addition to the Kathleen Valley project, Liontown owns the Buldania Project, a second hard-rock lithium project, located in the Eastern Goldfields. Drilling results from their Anna deposit have revealed a 15 million tonnes at 1 percent lithium oxide maiden mineral resources estimate, indicating an opportunity for additional growth of Liontown’s lithium resource base.

Liontown reports that it has received strong interest for its lithium products, a statement confirmed by the company’s recent deals with both electric vehicle giant, Tesla, and the battery branch of South Korean consumer electronics megacorporation, LG. Liontown will supply more than 100,000 tonnes of lithium to both companies.

Lithium is an essential component in the production of rechargeable batteries, which are used to power portable devices like smartphones, tablets, and in developing batteries for electric vehicles. With a compound annual growth rate of 25 percent, neither lithium hydroxide nor lithium-ion battery demand shows signs of waning.

Pilbara Minerals Limited

Pilbara Minerals Ltd (ASX:PLS) is an Australian pure play lithium company with 100 percent ownership of one of the world’s biggest hard rock lithium deposits. The largest of our stocks to watch, Pilbara Minerals is an upper mid cap company currently valued at a solid $9 billion. The company produces lithium and tantalum, and has recently reported its first profit as the price of lithium has boomed in the wake of increasing demands for the important rechargeable battery component. Pilbara Minerals aims to become a fully integrated lithium raw material and chemical supplier through a joint venture with POSCO, a South Korean steel-making company, manufacturing battery-grade lithium products. To this end, the joint venture has plans in place to develop a lithium chemical conversion facility in South Korea.

Pilbara Minerals owns 100 percent of its large-scale Pilgangoora Operation project, which produces high-grade lithium and tantalite. The site is located in the resources-rich Pilbara region of Western Australia, 120km from the town of Port Headland – an area supported by extensive infrastructure, including road and port access. As one of the largest lithium rock deposits in the world, the Pilgangoora Operation is considered a globally significant lithium project.

One most promising features of the Pilgangoora Operation is its two processing plants, Pilgan and Ngungaju, the presence of which enables rapid production of spodumene and tantalite concentrates in a time of rising market demand. The Pilgan plant alone has the capacity to produce around 330,000 tonnes of 6 percent spodumene concentrate and 321,000 pounds of 5 percent tantalite concentrate each year.

Pilbara Minerals has plans to extend its operations by both improving facilities at its existing Pilgan processing plant and expanding into a fully integrated lithium raw material and chemical supplier. In a joint venture with POSCO, the planned development of a lithium chemical conversion facility in South Korea will see the South Korean steel manufacturer use the Pilgangoora Operation’s spodumene concentrate to create hydroxide and carbonate products. The development of the South Korean facility comes at a time of increasing demand for electric vehicles and will provide Pilbara Minerals and its investors exposure to the rapidly growing lithium market in South Korea.

Regis Resources Limited

Regis Resources Ltd (ASX:RRL) is an Australian high-margin gold producer and explorer working out of Western Australia and New South Wales. Valued at $1.5 billion, the small cap company has been building its portfolio in the Duketon Belt of the Western Australian Goldfields since the late 1980s and has since expanded to pursuits in New South Wales and the Great Victoria Desert in Western Australia. Given the weak US dollar, inflation and recent events between Russia and Ukraine, prices for gold are expected to rise as investors cling to the value-holding resource. While global unrest is not something to hope for, it does suggest a reliable future for Regis Resources.  

Regis Resource’s Duketon Gold Project is located in the North Eastern Goldfields and consists of three operating centres: the Moolart Well Gold Mine, the Garden Well Mine and the Rosemont open pit. In the 2021 financial year, the project mined 9.9 million tonnes, producing 356,000 ounces of gold at a grade of 1.27 grams per tonne. The project has a promising future with the  potential for new satellite open pits within the project area. Resource drilling has identified opportunities for underground mining at Garden Well in addition to already approved underground operations.

The McPhillamys project, located in the established mining region of central western New South Wales, is one of Australia’s largest undeveloped gold resources. Regis Resources is in the process of developing a Definitive Feasibility study for the project, which has enthusiastic support from the local community.

Regis Minerals’ final project, Tropicana, is a 30 percent owned joint venture with AngloGold Ashanti, a South African gold mining company. Located 330km east-north-east of Kalgoorlie in Western Australia, the project produced 381,000 ounces of gold at 1.46 grams per tonne in the 2021 financial year. The project has great potential to grow, as a large portion of its tenement package is unexplored, and mineral deposits have been identified extending from two of its pits.

In a period of increased inflation, many investors are turning to gold to diversify their portfolio and so protect their assets. When increased inflation causes paper currencies lose their value, gold’s value increases – and the last time inflation was this high, gold prices were flying. In addition to a hedge against inflation, gold’s universal value has led to it being referred to as a ‘crisis commodity’ – in times of global instability, it’s good to have your hands on something that everyone values equally. With the impact of tensions rising between Russia and Ukraine rippling across the world, it’s unsurprising that gold is anticipated to be a reliable investment.

Walkabout Resources

While still working out of Western Australia, Walkabout Resources (ASX:WKT) represents a slight departure from the theme of Australian stocks to watch, as the company works primarily out of African countries, particularly south east Tanzania. A small cap company valued at $122.11 million, Walkabout is predominantly a graphite mining company, but has exploration projects on the go for gold and base metals in Northern Ireland and Scotland, and for lithium in southern Namibia. 

Walkabout’s flagship project is its wholly owned Lindi Jumbo Graphite Project. The project is located in south east Tanzania – a previously challenging mining region that has seen a recent uptick in interest from the likes of BHP, who invested in a $100 million Tanzania-based project in early 2022. Lindi Jumbo is situated in a region known for its high-grade coarse flake graphite deposits, with the project’s Definitive Feasibility Study reporting that the mine boasts the highest ore reserve grade in Tanzania (17.9 percent Total Graphite Content). The study further confirmed the project’s technical soundness and potential for excellent returns.

Operating costs for the Lindi Jumbo Graphite Project have been reduced by the promise of grid power to the mine, supplied by the Tanzanian Electrical Supply Company Ltd. This will power the construction of the processing plant, infrastructure and accommodation.

Lindi Jumbo is under construction and due to be commissioned in Q3 2022. Development is being fast-tracked to capitalise on a predicted high demand for premium flake concentrate.

As well as the Lindi Jumbo Project, Walkabout runs the Eureka Lithium Project in southern Namibia, and gold and base metal prospects in Northern Ireland and Scotland. Both projects are in their exploration phases but have high potential.

Classified as a ‘critical’ mineral in the United States and the European Union, graphite is a non-metallic mineral used in the production of lithium-ion batteries, which are found in electric cars, smartphones, flat panel displays and other consumer electronics. Demand for flake graphite is likely to increase with demand for electronic devices as the global economy rebounds from COVID-19, and with the exponential demand for electric vehicles. Walkabout’s access to large flake graphite – considered the purest and therefore most valuable form of graphite – suggests a promising future for the company and its investors.

With decreasing raw materials and increasing demand, investing in mining, while sometimes considered high-risk, has the potential for fantastic returns. Whether you’re looking to diversify your portfolio with base metals or you’re hedging against inflation with precious metals, our top 5 mining stocks are ones to watch in 2022.