Food for thought on the best mining stocks to buy on the ASX
Mining stocks make up a significant portion of the ASX.
To put things in perspective, there were 2,115 listed companies on August 1, 2022.
Materials, which includes mining, had 806 listings.
The next-largest sectors were Software & Services with 147 listings and Energy with 146.
Anyone looking to invest in the ASX will undoubtedly want to know the best mining stocks to buy.
Although it’s an impossible question to answer with certainty, some factors can help first-time investors and seasoned traders identify a shortlist of shares to consider.
Thinking of investing in silver, gold, or lithium?
Australia’s mining industry is diverse and dynamic, with dozens of different investment types to consider within the primary producer sphere alone.
While the reputation of some metals and minerals could make them seem like a sound investment, it’s worth considering the value of lesser-known materials.
As new industries emerge at home and further afield, ESG stocks become more popular, and global unrest adds to economic pressure, it could be worth broadening your horizons.
Here are some of the most talked-about up-and-coming investment opportunities in Australia.
Australia supplies around 60% of the world’s lithium, with most production coming from spodumene hard-rock deposits in Western Australia.
Today, domestic mines produce an estimated 55,000 tonnes of lithium, more than double the production from Chile (26,000 tonnes).
Lithium, like lead, is a crucial component in electric vehicle (EV) batteries.
It is also used in heat-resistant ceramics and glass and alloyed with aluminium to make high-performance metals for motorsport and aerospace applications.
Despite Australia having a significant size advantage when it comes to proven reserves, several factors have contributed to lithium stocks being relatively volatile in recent years:
- Production issues
- Supply constraints
- Slower-than-expected battery technology development
- Price volatility of lithium
Coupled with the high concentration of lithium deposits in Latin America (mainly Chile, Bolivia, Peru and Argentina), these uncertainties have resulted in more than a few false starts for lithium stocks on the ASX.
Arguably the most popular precious metal, gold has been used as an investment and value store for thousands of years.
Australia is the world’s second-largest gold producer, supplying 330 tonnes in 2021 to China’s 370 tonnes.
Investors often favour gold for its high liquidity and stability in unsettled times.
There are many ways to invest in gold, from physical gold to mining companies and ETFs.
Although the barriers to entry can be low, the price of physical gold can be high.
And gold miners carry a different risk profile than physical gold.
That said, gold remains a popular investment, and Australia’s strength in the global market means you have plenty of choices when considering gold as an investment.
Historically compared to gold rather than as an investment in its own right, silver could be the “next big thing” in precious metals investing.
Silver is a crucial material in growth industries, including solar panels and EV batteries.
Analysts believe this could help to offset silver’s historical volatility and push the price above US$30 per ounce in the coming years.
The Sorby Hills Project, one of Australia’s largest undeveloped silver deposits, contains more than 53 million ounces of silver.
For anyone looking to invest in silver, the potential upside of Sorby Hills presents an attractive proposition.
Rounding out the list of precious metal stocks is platinum.
Australia produces almost no platinum – only 0.1 metric tonnes – while South Africa makes up 72% of the global supply.
However, according to this AFR article, Australia could be about to “go platinum” for the first time in 40 years.
New deposit discoveries could move platinum production from by-product to major resource.
More accurately, the discovery could be a viable platinum group elements (PGE) deposit containing ruthenium, rhodium, palladium, osmium, iridium and platinum.
Palladium, platinum and rhodium are used to remove toxins from exhaust fumes, which could position PGE as a hot commodity in the context of tightening emissions legislation.
However, whether platinum will become a mining stock worth buying remains a speculative discussion.
Time will tell whether our PGE miners can compete with established industries in South Africa, Zimbabwe, Canada, Russia and the USA.
Although not a precious metal in the same category as platinum, gold, and silver, lead has plenty to offer as an investment.
The approximately 4.5 million tonnes of lead produced globally are primarily used in lead-acid batteries, although lead is a versatile metal with dozens of applications.
Lead is an enabler in Australia’s green energy transition.
Its role in battery storage technology should push prices higher in the coming years.
That could make lead one of the best stocks to buy on the ASX now, before production really takes off.
Of course, no investment is without risk.
That’s why the diversified deposit at the Sorby Hills Project, containing an economically sustainable balance of lead, silver and zinc, presents such an attractive investment opportunity in our view.
The final metal worth considering as an investment is Vanadium.
If you are familiar with mining stocks on the ASX, then you may recall the tumultuous times vanadium has endured.
There are currently no vanadium operations in Australia, but that could change in the future.
Vanadium has a plethora of industrial uses, including commercial batteries, high-strength tools and construction rebar.
So, although production issues have historically plagued Australia’s vanadium operations, new grassroots projects with promising deposits could spell a brighter future for the fledgling industry.
The bottom line on the best mining stocks to buy on the ASX
Investing always carries some risk, and any decision should stem from extensive research and expert advice.
And remember that past performance is not indicative of future prices.
The overviews in this article are a snapshot of what it could mean to invest in silver, gold, lead and other metals.
Where we can be bullish is in our aspirations for Boab Metals Limited (BML) to be one of the best silver stocks on the ASX as we move closer to production on the Sorby Hills deposit.