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MoneyTalks is Stockhead’s regular drill down into what stocks investors are looking at right now. We’ll tap our extensive list of experts to hear what’s hot, their top picks, and what they’re looking out for.
Today we hear from Perennial Value Management portfolio manager and resources analyst Sam Berridge.
What’s hot right now?
Berridge believes the energy sector is where the action is – particularly nuclear.
“I think any suggestion that decarbonisation is going to be achieved without nuclear is unlikely,” he said.
“The closer you look at this problem, the more obvious it becomes that it is such a massive issue to overcome, you need the full spectrum of carbon free energy to solve the problem – and that certainly includes nuclear.
“Whether or not it includes nuclear in Australia, that’s another issue, but certainly globally, it’s going to be part of the solution.
“The harder part of the question is when does the uranium price really start to accelerate, but I certainly believe it’s a matter of when not if,” he added.
Looking at uranium, Berridge’s pick is Silex, which has a uranium enrichment tech, and quite a large uranium inventory in the US – and recently welcomed the US Inflation Reduction Act which also includes a US$700 million funding package to support the High Assay Low Enriched Uranium (HALEU) availability program to be conducted over the next four years by the US Department of Energy (DOE).
“The company has exposure to rising prices, but also – and possibly more valuably – they’ve got a technology which uses laser enrichment to enrich uranium to fuel grade,” Berridge said.
“And that’s become quite important post the Russian invasion of Ukraine because the US doesn’t have any enrichment facilities of its own anymore, and the US nuclear fleet gets 28% of its enriched uranium from Russia.
“So, if Russia decides to cut that off, the US is in a spot of bother.
“All of a sudden, there’s a big rush on and the Department of Energy has thrown some money at this and thrown their weight and support behind this to develop in situ uranium enrichment in the US, and certainly that speaks to Silex and their intellectual property.”
His next pick is lithium player GT1, who recently doubled the total mineral resource tonnage at its Seymour Project in Canada to 9.9 Mt at 1.04% Li2O.
“The key investment thesis for this company is all about the board and the development expertise that sits within that board, which includes AMCI which is a recognised private mining company, Primaro who has done the vast majority of lithium projects, both in Australia and over in Canada,” Berridge said.
“And they have financial backing of NRW who’re a recognised miner and developer.”
Berridge says most new lithium companies have disappointed initially when ramping up production, born out of the fact that it’s a relatively new space and people with the expertise to execute the project to plan is quite thin on the ground.
“Whereas, GT1 has got a resource under their belt that’s going to continue to grow, but certainly they can start moving on the downstream processing part of the strategy and I think once they start wrapping some numbers around that it’s where the upside for this company is going to come from.”
Berridge’s last pick is Cooper Energy, a gas producer with operations spread across Victoria and South Australia he feels is worth a mention considering the gas shortage in Victoria especially.
“These guys have a steadily increasing production stream from their Orbost gas project, where they own the offshore platform, and they recently acquired the gas processing plant onshore as well last year,” he said.
“That removed the majority of the costs of that project, with Cooper previously paying a tariff to process their gas through that plant, so now their margin on gas produced has increased materially.”
Berridge also noted that the analysts’ consensus for achieved gas prices in FY23 is much too low.
“The market seems to be thinking that because the ACCC has instigated this sort of domestic gas availability mechanism, that that’s negative for gas prices – it’s not,” he said.
“Just because gas is available, the ACCC doesn’t determine at what price that gas is going to be available at and I’d be quite confident that the achieved price by Cooper for their spot gas sales is going to be comfortably above consensus expectations at the moment.
“That’s going to lead to earnings upside and de-gearing for that project – which they can then to reinvest in a number of other gas projects that they’ve got in South Australia,” Berridge added.
SLX, GT1 and COE share prices today:
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