Kristie Batten: Gold, rare earths and scandium juniors catch fire as miners navigate Trump trade war

Junior gold, rare earths and scandium explorers are all on a high, early winners from Donald Trump’s tariffs and the ensuing chaos.

Junior gold, rare earths and ... scandium stocks have been early winners from the Trump trade war. Pic: Getty Images

• Lion Selection Group's Hedley Widdup says we could be moving towards the bottom of the cycle ... and the opportunity to buy for the next mining boom

• Junior gold stocks can raise cash like never before as prices close on US$3300/oz

• Rare earths and scandium stocks see massive buying interest

Strap yourself in because the next three and a half years is looking like a wild ride for global markets, though it doesn’t necessarily spell disaster for junior miners.

Last week was a tumultuous one for global markets as they absorbed news out of the US, and to a lesser extent China, after what US President Donald Trump dubbed as “Liberation Day” on April 2.

This week, things have settled somewhat. But it’s not expected to be the end of the volatility.

In fact, media personality and finance commentator David Koch reckons we’ve still got 3.5 years of volatility to come.

“I don't think it ends until the end of Trump's term,” he told the Resources Rising Stars Gather Round Conference in Adelaide last week.

“Trump 1.0, when he came in, he had a lot of very sensible Republicans around him who were conservative, understood the system, understood building relationships, understood their power in geopolitics around the world.

“Then he got booted out, and for four years, seethed and surrounded himself with a lot of yes men and women, and he has come back with none of those steady Republican influences.”

However, Kochie believes Australia is in a good position to weather the volatility.

“I know it's un-Australian to acknowledge anything we do well in this country, but we're one of only nine countries in the world with a triple A credit rating,” he said.

“If you wanted to ride out a downturn like this, there’s not too many other countries you'd want to be.”

What about the juniors?

Attending the RRS Gather Round Conference last week, you’d be forgiven for not noticing any market rumbles. The event, in its second year, was larger than last year with 350 attending in person and another 540 people watching the livestream.

Lion Selection Group managing director Hedley Widdup told Stockhead he was impressed with the level of liquidity of the gold juniors.

“The most positive thing is that the gold juniors are reflecting that probably more strongly on a move of, let's say US$3000 to US$3200 an ounce of gold, than they did for the whole time from US$2000 to say, US$2800 an ounce,” he said.

“That equity transmission is actually underway, and when you think about that, if that's not disrupted, there's a hell of a lot of upside in a large handful of gold juniors, so to me, that's probably the big positive to pull out.”

Widdup has most recently had the famous Lion mining investment clock at 4 o’clock. Midnight signifies a crash, while 6 o’clock is boom-time.

“We've been debating, is it five? Is it moving towards six? I think it's undeniable that liquidity has lifted as a result of gold, and when explorers can raise somewhere between $5 million and $25 million in a lick, rather than struggling to get $1 million, it makes for a big liquidity boost, so I would say that is definitely advancing the clock,” he said.

Widdup said the turning point for the market in 2016 was when BHP (ASX:BHP) and Rio Tinto (ASX:RIO) moved from progressive dividend policies to profit-based policies.

“Everyone went, ‘oh, wow, hang on a minute, aren't resources stocks cheap?’ And there was a turning point that sort of went from capitulation one day to enthusiastic buying the next,” he said.

“And what we've seen in Rio and BHP, as a result of the Trump tariffs, I think maybe that's bringing on capitulation. I think it's a bit early to say it's six, but we might look back at now and think it is, so I think it's four, moving to five – maybe beyond – is the answer.”

As juniors wait for the clock to strike six, we found a few pockets of small-cap explorers that have flourished in the current market conditions.

Gold

Market volatility has pushed the gold price to record highs in both US and Australian dollar terms, pushing big producers including Northern Star Resources and Evolution Mining to all-time highs in the process.

It’s not always the case, but some of those gains have flowed through to even the smallest explorers.

Gold newcomer Leeuwin Metals (ASX:LM1) doubled last week as it got to work on its Marda gold project, acquired from Ramelius Resources (ASX:RMS) earlier this year.

Leonora-Laverton explorer Arika Resources (ASX:ARI) has been on a tear, rising by more than 50% last week and largely holding onto gains after reporting two lots of high-grade gold results.

Cavalier Resources is up by more than 75% since Liberation Day after releasing a prefeasibility study for its Crawford project near Leonora.

On the East Coast, Koonenberry Gold (ASX:KNB) and Legacy Minerals Holdings (ASX:LGM), both of which have exploration deals with Newmont Corporation (ASX:NEM), have each gained over 30% in the past week or so.

Rare earths

Rare earths have been in the spotlight for geopolitical reasons, after China put new export controls on some medium and heavy rare earths.

Reuters reported on Sunday that the export of seven rare earths from China had been halted completely.

Bell Direct market analyst Grady Wulff told the RRS Gather Round Conference that institutional investors had been piling into producer Lynas Rare Earths.

As is the case with gold, that interest has filtered down into the developers.

Australian Strategic Materials (ASX:ASM),  Northern Minerals (ASX:NTU) and St George Mining (ASX:SGQ) all put out releases highlighting the strategic nature of their respective deposits, which caught the market’s attention.

ASM, owner of the shovel-ready Dubbo project in New South Wales, has almost doubled since Liberation Day, while Northern Minerals, which holds the Browns Range project in the Northern Territory, is up 85%.

St George jumped 50% yesterday alone after reminding investors of the importance of its Araxá project in Brazil.

Scandium

Alongside the more commonly known rare earths like neodymium, it’s worth honing in on scandium, which was one of the metals on China’s new export control list.

Rio Tinto is into scandium and describes it as a “rare, versatile and useful metal”.

While the global market for the microalloying element is tiny, Australia, or NSW specifically, is blessed with plenty of scandium.

Robert Friedland-backed Sunrise Energy Metals (ASX:SRL) lays claim to one of the world’s largest and highest-grade scandium deposits at its Syerston project in NSW.

It’s hard to believe, but the circa $60 million Sunrise had a market cap of more than $1 billion back in 2017 off the back of its namesake nickel-cobalt project, also in NSW, and has shot up by more than 200% so far this month.

The company is now updating the 2016 Syerston feasibility study.

Australian Mines (ASX:AUZ) owns the nearby Flemington scandium-nickel-cobalt project.

Amid the Chinese restrictions, Australian Mines is now expanding its scoping study for the project.

“With China potentially tightening scandium exports, there is a clear opportunity for Australian supply to play a greater role in the global market,” AUZ CEO Andrew Nesbitt said.

AUZ shares are up by more than 35% in the past few sessions.

At Stockhead, we tell it like it is. While Australian Mines, Koonenberry Gold, St George Mining, Arika Resources and Legacy Minerals Holdings are Stockhead advertisers, they did not sponsor this article.

Originally published as Kristie Batten: Gold, rare earths and scandium juniors catch fire as miners navigate Trump trade war