RIU's Treasure Trove: Will the 10-Bagger Streak Continue?
The RIU Explorers Conference is renowned for its track record in uncovering 10-baggers. Will history repeat in 2024?
In mid-February, the Equities Club team attended the RIU Explorers Conference in Western Australia, a key event for the mining and exploration sector. Renowned for its track record of uncovering '10 baggers' - the holy grail of small-cap investing - this three-day event is for companies to talk with investors, funds, and brokers.
With a diverse mix of attendees from across the country, the Equities Club team took in the overall market sentiment, assessed companies and uncovered several small-cap ASX companies we believe can capture investor attention in 2024.
What’s a 10 bagger?
A 10-bagger is essentially that, 10 times your initial investment, a 1000% gain.
Gold exploration and market dynamics
Gold explorers shone brightly at the conference, reflecting the enduring allure of gold investment. After all, half of all the money spent on exploration in Australia in 2023 was spent looking for gold. With the gold price showing strength above US$2000/oz, many juniors were promoting upcoming drill programs and recent results.
Despite all the right indicators, this enthusiasm has yet to quite make its way into gold equities. It's a curious case of cautious optimism in the air, creating an intriguing scenario. There's a gap - a disconnect between gold's rising price and a relatively sluggish inflow of funds into gold equities. And in this gap, there might be a golden opportunity for investors.
Critical minerals at the forefront
The spotlight at the RIU Explorers Conference was on critical minerals, with lithium, nickel, rare earths, and copper centre stage. Companies quickly emphasised the long-term demand for lithium and nickel in the face of current headwinds. In contrast, rare earth companies continued to focus on diversifying supply away from China. Copper is still drawing increased interest; it is the second most explored commodity in Australia behind gold. But while demand for copper is growing, discoveries are not keeping pace, making many worried about the growing divergence of increased demand and reduced supply.
Is hydrogen the key to net zero?
Net-zero objectives remained a focal point among explorers at the conference and a point of discussion among investors, with questions on how investments align with emission reduction goals. As an iron ore beast, Fortescue spends billions on research and development; junior explorers will be the beneficiaries in years to come, poised to adopt breakthrough technologies in their stride towards net zero. With the hydrogen market set to grow significantly by 2030, it could be the Swiss army knife in the quest for net zero.
10-bagger backstory
The RIU Explorers Conference has become a beacon for those dreaming of a 10-bagger, and rightly so. It has a proven track record of uncovering companies that deliver 10x returns for investors in the twelve months following the conference.
If we look back over the past four years, we have the below 10-baggers:
1. 2023 – Azure Minerals
2. 2022 – Galileo Mining
3. 2021 – Rox Resources
4. 2020 – Ardiden Limited
Who caught our eye?
The Equities Club team met with and analysed several companies that we believe could potentially re-rate in the coming twelve months, a few of the standouts we spoke with are below.
Lanthanein Resources (LNR): A Western Australian lithium explorer with ground directly adjacent to Wesfarmers and SQM 180mt+ lithium mine Mt Holland. At a current valuation sub $6m market capitalisation, the proximity to Mt Holland (only 400m away) and with a board that includes 2023 10-bagger chairman Brian Thomas from Azure, there’s a lot to like about LNR.
With lithium-bearing pegmatites that look to be running directly into LNR's tenements and a drill program set to start in Q2, and with lithium sentiment turning, it could be a perfect storm.
Here’s Thomas talking about LNR at the conference:
Encounter Resources (ENR): With an array of copper, gold, lithium, rare earth and niobium targets, ENR is well positioned to take advantage of positive sentiment in commodity markets. Being in a strong cash position and having already made a niobium discovery in the West Arunta near WA1, ENR has the balance sheet to define assets with drilling success. Farm-in agreements with IGO and S32 give ENR access to high-quality exploration teams, allowing them to take advantage of further expertise that would not normally be afforded to most companies.
FireFly metals (FFM): With a copper and gold portfolio in mineral-rich Canada backed by a management team with significant experience at Northern Star Minerals and Bellevue Gold, FFM can take any discovery to production if necessary. A substantial bank balance and considerable resource growth potential could allow FFM to re-rate if they have further drilling success. Given the existing infrastructure and their Green Bay operation being fully permitted, the time to market would be significantly less than a discovery.
Sarytogan Graphite (SGA): With a vast, high-grade graphite resource close to existing infrastructure and having recently achieved battery-grade graphite, SGA is now in a solid position to market itself to the broader market. With the release of a PFS followed by a mining lease application and continued talks with offtake partners, the next twelve months for SGA could be significant.
At the RIU Explorers Conference, it was clear: the hunt for the next big discovery is still on despite weaker commodity prices.
The exploration sector holds a wealth of potential opportunities ripe for the taking, and as avid supporters of savvy investing in small-caps, attending this event was like a treasure hunt for us.
Now the question remains: Will the conference’s 10-bagger streak continue?