Regal Funds Management, on 2 May this year, bought a 5.41% stake (S$11.3 million) in Alliance Mineral Assets, a Singapore-listed lithium producer which co-owns the Bald Hill Project in Western Australia. Seven days later, at a Sydney conference, Regal's head of Australian equities spoke about the exciting prospects of battery minerals. 


Watch this video coverage of day one of the conference --> 

Julian Babarczy, head of Australian equities, at Regal Funds Management, said the commodities sector, under-invested over the last decade, presents great opportunities to investors now.

riu5.18Julian Babarczy presents. Within the sector, the markets for 'new age' minerals will see "unprecedented growth" as the electric vehicle era unfolds.

"Particularly exciting are the 'new age' commodities -- lithium, cobalt, graphite, high purity alumina.  

"They are growing at unprecedented rates -- 20 and up to 100 percent per annum -- which I've never seen before in my investing career and I have been in a fund manager for almost 15 years now," he said at the RIU Sydney Resources Round-up (8-10 May). 

riu sydney5.18S'pore investors seeking to learn about Aussie mining companies that may benefit from the electric vehicle era.
"This is a great time to be an investor I think and if you're prepared to ride out some of the volatility through early stage companies, you can make tremendous returns."

While lithium, cobalt and, to some degree, graphite are known beneficiaries of the EV era, high purity alumina (HPA) is obscure.


HPA will ride on the growth of not just EV but also LED as it goes into substrates in the making of LED lights and into separators within lithium-ion batteries.

Demand for HPA 
will grow about 4X over the next decade, said Mr Babarczy. 

Government subsidies and energy efficiency are among the factors that will lead to almost a doubling in the LED market over the next handful of years.

There's no substitute for HPA -- which has very high thermal stability and is unreactive -- so it's very much a one-to-one correlation between the demand growth in LEDs and the demand for HPA that goes into those lights, said Mr Babarczy.  


The lithium market is expected to grow 3.5X, while cobalt, over 2X and graphite, almost 2x.


For each of these commodities, Mr Babarczy highlighted ASX-listed stocks which Regal is invested in: 

 

Syrah Resources

Share price: 
A$3.25

Market 
cap: 
A$967 m

Syrah Resources -- Regal is the earliest and, now, among its largest institutional investors since Regal invested in this graphite producer in 2012.

Graphite is used in the anode of lithium-ion batteries.  

"Syrah is developing a Tier-1 global asset, it is very low on the cost curve, and will generate tremendous cashflow once they are up and running, and they are ramping up now. They will end up owning about 30% of the global graphite market."

Syrah, whose mine is in Mozambique, 
has a downstream anode processing facility. It is fully-funded, and has offtake agreements with some battery manufacturers as well as industrial users.

The management is Tier-1 (ex-BHP), having transitioned "from a very entrepreneurial team to one which is very much focused on execution."


Global Geoscience

Share price: 
A$0.46

Market
cap: 
A$616 m

  Global Geoscience: It has a massive lithium-boron deposit in Nevada, and is the most advanced development project in the USA.

"This project could be one of the lowest cost 
producers globally, with a mine life of 50 to 100 years."

And it has significant boron credits. 


Jervois Mining

Share price: 
A$0.455

Market
cap: 
A$97 m

♦ Jervois Mining:  Its Nico Young project in New South Wales "is in some ways an analogy to the Clean TeQ's Sunrise Project although they're going about it in a very different manner.

"They're targeting a much smaller capital, and higher returning, project which I think is potentially more friendly to shareholders.


"It's not globally significant but it has a high returning, cash-generative ore body that could underpin strong dividends to shareholders. Given the market cap and board/management team, which for me is top tier – we think they can grow the company into a bit of a cobalt house over time."

FYI Resources

Share price: 
A$0.12

Market
cap: 
A$22 m

♦ FYI Resources:  A high purity alumina (and potash) play, "it has tremendous value upside, probably more than the others, but also a higher risk profile as well. lt's got a potentially globally significant ore body, it's potentially very low on the cost curve."

JulianBabarczyJulian Babarczy, head of Australian equities, Regal Funds Management Regal "has a history of being a more aggressive manager of their equities portfolio and are prepared to take on much more risk if there are commensurate returns," said Mr Babarczy.

 

This is unlike some of its peers. 

"I think most institutions in Australia look at these early stage companies and say 'Look, they are very risky, we don't really know the outcomes, so how can we place money there in low liquidity environments, very low market caps, early stage business models? And they are poorly covered by brokers and analysts.' "

 

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