Latest news with #DavidFranklyn
News.com.au
13-05-2025
- Business
- News.com.au
Argonaut Algorithm: Why uranium stocks could be back in investors' good books
Argonaut Funds Management's David Franklyn joins Stockhead to share investing secrets from the high-conviction resource sector investing fund, including his junior stock pick of the month. Uranium is back on the up, with a move to US$70/lb for spot prices in recent weeks breaking several months of malaise. While contract prices have remained stubborn, circling around the US$80/lb range for some time, spot prices have been under pressure since hitting decade highs of US$107/lb in January last year. That's come despite positivity around the long-term future for nuclear energy, with around 65 new reactors currently under construction worldwide and the World Nuclear Association tipping a doubling of demand out to 2040. The uranium market is already in a 50-60Mlb deficit, with ~156Mlb produced last year. In part that is because utilities have been well-supplied, and until recently were able to rely on bargain basement pounds from the spot market. 2024 was the strongest contracting year in over a decade. But this year has seen utilities nervous to deal, with potential tariffs hurting market confidence. Argonaut Funds Management's David Franklyn said the utilities had been holding on for a better deal, but that a supply rush was now looking too slow to come online. "They've had enough stocks to see it through, but there's been an expectation that then you've got a whole lot of new projects coming on stream, whether it's NexGen or Denison or Paladin or Boss," he said. "The expectation was that there was this emerging wave of production coming through. I think what we're seeing is that most of those projects have probably been pushed out a little bit. "The ones that have come on stream, they haven't delivered the volumes as quickly as the market was expecting." Franklyn said what Argonaut was hearing from the industry was that utilities were starting to put out expressions of interest for new contract volumes. More drivers Franklyn sees other positive drivers for uranium, underpinning the recent shift back to positive sentiment. Uranium has remained exempt from US tariffs, while the White House has also been rumoured to be preparing Executive Orders to induce quicker reactor builds and approvals, using the Department of Defense as a mechanism to circumvent historic bureaucratic processes. "That's very positive for future demand," Franklyn said. The European Commission is also looking at developing a roadmap that would restrict deals with Russia on enriched uranium, while tech giants are turning to nuclear to power their AI data centres, which are energy hungry and in need of low emissions, baseload power. "There's just this confluence of events with lots of positive news saying the demand for uranium is going to continue to increase and the market's, more and more conducive to that," Franklyn said. The Sprott Physical Uranium Trust also boosted market confidence on Monday night after committing to a US$25.55m non-brokered private placement. That meant it avoided having to sell uranium into the market to preserve its balance sheet, removing a key overhang for uranium equities. Franklyn thinks over the long-term prices will settle into a range of US$75-80/lb, but sees real risks of a run up to over US$100/lb as the market rebalances in the short term. Once NexGen Energy (ASX:NXG) has developed its Rook I project in Canada, there will be three major producers on the listed market – Kazakhstan's London-listed Kazatomprom, Canada's Cameco and the Canadian-Australian NexGen. Behind them are a number of Australian and Canadian companies who are smaller in scale and either still in the study phase or ramping up operational restarts. Many, notably Honeymoon mine owner Boss Energy (ASX:BOE) and Langer Heinrich operator Paladin Energy (ASX:PDN), remain heavily shorted, with close to a quarter of Boss' shares held short. Franklyn said there may be doubts from the market that ASX companies can keep their costs down and generate a strong margin if prices remain around US$70/lb. It should be noted both produced solid March quarters, with Boss generating 295,819lb of drummed uranium at a C1 cost of US$21/lb, while Paladin produced 745,484lb at US$40.6/lb at its Langer Heinrich mine in Namibia. Boss also has the majority 30% stake in enCore Energy's Alta Mesa project in Texas, which produced 130,015lb at a cost of US$36.11/lb in the first quarter. Argonaut's stock pick of the month Staying in the uranium space, and Franklyn sees two standouts. Both are listed in Canada, though the first one comes with a shared Australian listing as well. That's NexGen Energy (ASX:NXG), which owns the mammoth Rook I project in Saskatchewan's famously well-endowed and high-grade Athabasca Basin. "NexGen looks pretty compelling," Franklyn said. "It's got scale, it is going to be low cost. And you've got a view as to how the market might value it by looking at Cameco. " I think that is a standout in the sector." Rook I includes the Arrow project, which contains 3.75Mt of measured and indicated resources at a grade of 3.1% U3O8, for 257Mlb of uranium oxide. Its probable mineral reserves have been estimated at 240Mlb within 4.6Mt of ore at 2.37% U3O8, with Arrow to cost an estimated US$1.3bn to develop but run at costs of just US$7.58/lb U3O8, producing a monstrous 29Mlbpa over its first five years. NXG has had to navigate a complex permitting route for Rook I, but has line of sight now with hearing before the Canadian Nuclear Safety Commission now set for November this year and February 2026. Franklyn also likes the look of TSX-listed ISO Energy. NXG holds close to 32% of the Canadian firm's shares, which are currently trading at C$9.28 for a market cap of C$446m. ISO holds the Hurricane Zone project in the Eastern Athabasca Basin, which contains an indicated resource of 63,800t at an obscene 34.5% U3O8 for 48.6Mlb. An inferred resource outside that contains 54,300t at 2.2% for 2.7Mlb of yellowcake, with the project around 40km from Orano's Maclean Lake mill. "To put that into context. Paladin is 0.07%, Boss is 0.04%, Deep Yellow is 0.03% and Bannerman is 0.02%," Franklyn said. "Cameco's Cigar Lake is about 15%, McArthur River is about 5% and NexGen, their overall project is about 3% but they've got high areas at about 15%. "So you can just see it's pretty unique, relatively good scale ... very high grade in an area with good infrastructure." Argonaut Funds Management is a high conviction resource sector investor managing the Argonaut Natural Resources Fund and the Argonaut Global Gold Fund. David Franklyn is the Fund Manager for the Argonaut Natural Resources Fund. The views, information, or opinions expressed in this article are solely those of the interviewee and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.
News.com.au
01-05-2025
- Business
- News.com.au
ASX Resources Quarterly Wrap: Lithium green shoots despite market pull-back
The lithium market is still in the doldrums but lithium focused resources stocks are staying active with exploration Others are safeguarding capital to capitalise on future market recovery We survey quarterly reports to bring you highlights from up and comers like Pursuit Minerals, Green Technology Metals, Cosmos Exploration and First Lithium Lithium prices are deep into the cost curve by any metric, and a number of lithium stocks are pushing ahead with exploration despite the downturn in the hope of arriving early to the next cycle. At the upper end of town, Liontown Resources (ASX:LTR) reported solid results from its Kathleen Valley project, which declared commercial production during the quarter amid a volatile trading environment. Revenue rose by 17% to $104m, with $14m in cash flow generated from operations. The company produced 95,709 dmt of spodumene concentrate and sold 93,940dmt across five shipments. LTR managing director and CEO Tony Ottavino said the company is seeing consistent, positive performance across key metrics, including the shipment of over 180,000dmt of spodumene concentrate since production started, generating $205m in revenue. He added that the emerging lithium producer remains focused on streamlining costs, with operational efficiencies continuing to pay off. Lithium frontrunner Pilbara Minerals (ASX:PLS) noted a 34% drop in production volume to 125,000t at Pilgangoora as well as a 30% slide in revenue over the prior quarter to $150m. Argonaut Funds Management's David Franklyn said although Pilbara shares have dropped 41% in the past three months, there was nothing dramatic in the March quarterly report. But it continues to show that we are 'bouncing along the bottom in the lithium market'. 'It just took another step down with the recent pull back in the market. If you look at the results, I think they're doing everything right operationally,' he added. A few green shoots were also reported at the smaller end of the market, with some highlights including the successful commissioning of Pursuit Minerals' 250tpa lithium carbonate plant in Salta, Argentina. That's where we head for our wrap of the quarterlies you may have missed. Pursuit Minerals (ASX:PUR) PUR's lithium carbonate pilot plant sits within its wider Rio Grande Sur project, which is being advanced through a deliberately phased and modular development strategy that enables the company to manage capital intensity, validate process flow efficiency, and expand in alignment with market demand. Initial production from synthetic brine has kicked off, making the transition to near-term revenue generation. Progress was also made on feasibility studies to incorporate the 339% jump in new resources that were upgraded last year (1.1Mt) and a staged development plan with the company saying it remains on track for release in H1 2025. Active discussions were also held with offtake partners who made multiple product sample requests in the quarter. It also advanced numerous engineering and geological workstreams and permitting approval processes. Green Technology Metals (ASX:GT1) GT1 said it is continuing to implement cost-control measures in direct response to challenging global lithium market conditions. GT1 managing director Cameron Henry said exploration programs have been significantly scaled back, and a targeted workforce restructure has resulted in a 40% reduction in staffing levels, retaining only those roles essential to progressing core projects. 'Given the sustained challenges in global lithium markets, all key workstreams and development timelines—including any potential Final Investment Decision (FID) at Seymour—are dependent on improved market conditions and the availability of funding support from strategic partners,' he said. 'GT1 will continue to rigorously assess its cost base and project schedule, taking further action where necessary to safeguard capital and ensure the company remains well-positioned for a market recovery.' A 1 for 3.85 non-renounceable pro rata entitlement offer during the period, raising approximately $3.46 million before costs. The Entitlement Offer and Top-Up Offer closed on April 15 with strong participation from directors John Young, Cameron Henry, Patrick Murphy, and existing long-term shareholders and institutional investors. GT1 is now preparing funding applications under the Critical Minerals Infrastructure Fund (CMIF) for all three of its core projects. New applications are expected to be finalised and submitted during the upcoming quarter. Cosmos Exploration (ASX:C1X) C1X started activities that private Australian company EAU Lithium, which it acquired in December 2024, had agreed to perform under its technology agreement with Bolivian state-owned lithium company Yacimientos de Litio Bolivianos (YLB). EAU Lithium had been selected by YLB to undertake technology testing on brines from Salar de Coipasa, Salar de Empexa, and Salar de Pastos Grandes. As part of this, the company has shipped 5m3 of bulk brine samples from the three salars to Germany for testing at Vulcan Energy Resources' (ASX:VUL) facility in Germany. While these samples are still in transit from Bolivia, testing of synthetic brine formulated to replicate the major ion chemistry of the three salars is underway at the facility to provide early indications of the compatibility of Vulcan's VULSORB sorbent ahead of any future test work using the bulk brine samples. VUL's direct lithium extraction technology is being evaluated for its potential to provide a more efficient, scalable and environmentally sustainable solution for lithium recovery from Bolivia's complex brine chemistry. Successful validation of a DLE tech will represent a significant step forward for lithium extraction in Bolivia, enabling higher-yield, lower-impact processing in one of the world's largest untapped lithium resource jurisdictions. Results from the testing will support ongoing negotiations toward a proposed industrialisation agreement, which is expected to establish a long-term framework for the supply and processing of lithium-rich brine over multiple decades. This agreement would form the basis for commercial-scale development and a secure, sustainable lithium supply chain aligned with Bolivia's national development objectives. First Lithium (ASX:FL1) During the March 2025 quarter, First Lithium progressed renewals of its mining licence after the Mali government moved on March 15, 2025, to partially lift the suspension of mining permits that had been in place since September 2022. The company also received a letter from the National Director of Geology and Mines in Mali which confirmed that it could continue geophysical survey work on both the Faraba and Blakala permits in the interim while requirements for the licence renewal process were being finalised. FL1 also finalised a loan note of $1.2m via an agreement with sophisticated and professional investors. Funds will be used to finalise the licence renewal process and advance a maiden resource estimate for Blakala as well as general working capital. The resource update will include some stellar drill hits, such as strikes in the Eastern pegmatite zones including 24m at 1.53% Li2O from 129m, 28.59m at 1.51% from 117m and 9m at 1.62% from 117m. Anything above 1% Li2O is generally considered economic with only a handful of deposits reporting grades upwards of 1.4%. The loan funding will occur in three $400,000 tranches with a conversion price of $0.10 each, with interest accruing at 10% per annum and payable in stock on the same terms as the loan.
News.com.au
23-04-2025
- Business
- News.com.au
The Argonaut Algorithm: Fundie David Franklyn's key takeaways from March reporting season
Argonaut Funds Management's David Franklyn joins Stockhead to share investing secrets from the high-conviction resource sector investing fund, including his junior stock pick of the month. While the market's attention has been inexorably turned to the Trump-China trade war, global economic fears, tariffs and war, the world has kept turning. That includes those of miners, who are deep in one of the key reporting seasons of the year, delivering results to the market peeling back the layers on how their operations performed in the March quarter. These are key moments for analysts and fund managers, who get to assess which stocks surprised to the upside and downside, or have hidden info that could provide clues about future performance. This month, Argonaut's David Franklyn joined Stockhead to share some of his highlights from the first week of the ASX mining sector's reporting season. Pilbara Minerals (ASX:PLS) Franklyn says there was nothing 'dramatic' in the March quarter result posted by the leading lithium stock on the ASX. But it continues to show that we're "bouncing along the bottom in the lithium market. Franklyn noted Pilbara shares, as of mid-week, were down 41% in the past three months and 63% over the past year. "It just took another step down with the recent pull back in the market. If you look at the results, I think they're doing everything right operationally," he added. Production was chopped from 188,000t to 125,000t after PLS shut its secondary Ngungaju plant, but that's only stemming cash outflows. "Unit costs were reported at about US$500/t, but the all in cost was something around US$800/t once you strip out growth capex," Franklyn said. "It just highlights, you've got one of the most efficient producers of hard rock lithium really struggling to make money. "There's obviously some headwinds on the demand side of things slowing down a bit, and still a lot of supply. "But it doesn't look sustainable that prices can stay where they are for any meaningful length of time if one of your main, low cost producers is struggling." Franklyn says it's still a little early to call a rotation back into lithium, but that value is emerging with the sector significantly sold off. Genesis Minerals (ASX:GMD) ASX gold stocks may have been carted yesterday as Trump's aboutface on China reversed bullion's gains. But at current prices margins are screaming. Franklyn said Raleigh Finlayson led Genesis delivered a "cracking result" in the March quarter, producing just shy of 60,000oz across the Leonora and Laverton hubs. "They realised prices of about $4500/oz Australian and their costs were around $2300/oz Australian," Franklyn said. " So a very good margin there, they added over $100 million for the quarter, which is strong. And they're also just ... fleshing out their growth profile." " This year they'll produce about 210,000oz of gold by '27 that should be 300,000oz, and then moving to 400,000oz and higher the further you go out." Franklyn said Genesis was attractive because it can achieve that growth organically. "I think it still looks one of the better value gold producers," he said. Greatland Gold (LSE:GGP) Greatland Gold is a major position for Argonaut in both the Natural Resources Fund and Gold Fund. And its first full quarter in charge of the formerly Newmont owned Telfer gold mine in WA's Pilbara delivered with around 90,000oz of gold and 3000t of copper, the latter a handy by-product credit to reduce costs. "The big issue with this asset was what kind of production can they drag out of the Telfer asset while they're waiting for Havieron to come on stream in sort of '28-29 and they gave some guidance there as well," Franklyn said. "They're looking between the 300-340,000oz in '26, 260-300,000oz in '27, which really fills that gap, and we think there's still work to do on exploration and increasing the reserve base." While the US$475m acquisition price seemed hefty last year, GGP is set to pay for the acquisition within 12-18 months given current gold prices. But Franklyn says Telfer and the nearby Havieron development will be one of the "great long term assets" in the Australian market, with a mid-year secondary listing on the ASX to put the ~$4bn capped Andrew Forrest backed company on the radar of even more institutions. Capricorn Metals (ASX:CMM) The third gold miner that piqued Franklyn's interest was Mark Clark's Capricorn Metals, owner of the Karlawinda and Mt Gibson gold projects. Karlawinda produced around 30,600oz in the March quarter with all in sustaining costs still guided for FY25 of $1370-1470/oz, well into the bottom quartile for the gold industry. "They're looking to increase production from Karlawinda and they're also bringing on their Mt Gibson project over the next couple years," he said. "Their production is going to something around 120,000oz to around 300,000oz or a little bit more. "It's going to be 10 year mine lives, low operating costs, strong balance sheet, limited hedging, we think it looks pretty good."* *This interview took place before news broke that CEO Paul Criddle would go on leave after being charged by a Perth court with assault. Executive chairman Mark Clark will take on day to day management of the gold miner. Franklyn has previously touched on Amplitude before, naming the east coast gas explorer his stock of the month in March. "Their March quarter was very good, production was in line with guidance at about 6.1 petajoules," he said. "The average realised gas price increased to over $10/GJ, which was good." But Franklyn said the key developments of Amplitude came on the corporate end. "The two key things we were looking for from Amplitude were 1) the Orbost plant providing some consistency on its production output, and that's happened," he said. "And then secondly they've got an east coast gas project which is their growth project. Mitsui said they didn't want to proceed with that, they've now got OG Energy that has come in as a partner, which is a very good partner. "So that project can now proceed and is funded. So we think that story continues to look good. It's on an EV/EBIT multiple of less than 4x in 2026. "So it's the cheap, it's defensive. And I think the issues they've had over the past couple of years are starting to be resolved under the management team." Stock of the month While producers in gold and energy caught the eye in reporting season, rare earth companies have stood out in recent weeks in spite of mild pricing that has persisted for well over a year. "What you're seeing at the moment with the trade issues that are taking place is China seeing an opportunity to restrict supply into the West, and so there's a real focus now on how we get these rare earths that are critical for magnets and where they're going to come from," he said. While Lynas (ASX:LYC) is the standout producer in the ASX, Franklyn is also turning his attention to more speculative stocks with clay-based deposits in Brazil. He thinks they have the prospect of coming into production relatively quickly and at low cost. "The Brazilian rare earth players look like they can produce and still make money at something around current levels," Franklyn said. "The one we like is Meteoric Resources (ASX:MEI). "It's got the Caldeira ionic clay project in Minas Gerais in Brazil, which is a well-established mining area, they've got a PFS which is due out in the next quarter and we think that they can develop it and become producer in the medium term." Meteoric is up 65% in the month to date but down 52% over the past 12 months to Tuesday this week, suggesting there's still value in what Argonaut sees as a standout in the sector. Caldeira is both high grade and rich in heavy rare earths, making it a strategic asset for the US and Brazil, Franklyn said. Argonaut Funds Management is a high conviction resource sector investor managing the Argonaut Natural Resources Fund and the Argonaut Global Gold Fund. David Franklyn is the Fund Manager for the Argonaut Natural Resources Fund.
