Published On: January 5th, 2024
Figure 1: ASX Listed Stocks with Multibagger Potential
Equities have always been challenging but a significant tool for wealth creation. People with the skill to identify early opportunities and patience create massive wealth.
The S&P/ASX 200 (XJO) is Australia’s share market Index for the top 200 ASX-listed companies by float-adjusted market capitalisation, accounting for 81% of Australia’s equity market (September 2023). The basic materials sector contributes 24.8% to this Index.
Australian (ASX) Basic Materials Industry has grown 69% over the past year. Estimated earnings of the industry are forecasted to grow 9.4% annually.
Figure 2: Australia’s Basic Material Industry Valuation
The basic material industry in Australia demonstrated fantastic growth over the year, boosting investors’ morale and confidence in long-term growth rates in the sector. The Industry is trading at a Price to Earnings Ratio of 23.4x, higher than its 1-year average PE of 16.3x.
Over the last three-year period, the Basic Material Industry’s total earnings have surged continuously. Industry revenues are growing by approximately 3.1 % per year. Sector performance in the market during the year develops the core optimism in the investors’ community.
Digitalisation, technological advancements like automation and sustainable practices are shaping the modern metals and mining sector.
The mining sector plays a crucial role in Australia’s economy, accounting for 75% of the country’s exports. Alone, the mining industry contributes 32% (AUD 41 billion) of all company tax paid in the nation in 2022.
Equities, while volatile historically, provided attractive returns to investors. The country has witnessed a high inflation rate in recent years. The country’s federal bank keeps raising Interest rates to curb inflation. Despite increased interest rates, the mining sector is growing consistently and creating wealth for investors.
As the mining and exploration sector continues to evolve, some noteworthy Australian Securities Exchange (ASX) listed mining and exploration companies deserve investors’ attention.
1. Calima Energy Limited
Figure 3: Calima Energy Limited Assets
Calima Energy Limited (ASX: CE1) is a Canadian oil and gas producer and explorer. The company’s key assets in Alberta, Brooks, and Thorsby are characterised by low-cost, cash-flowing operations with substantial growth potential. Calima is a growth-oriented company that is generating free cash flow successfully.
With a returns-focused strategy, positive cash flow, and commitment to ESG principles, Calima Energy is positioned for growth and value creation in the Australian stock market.
This value has been reflected in an agreement by the Company to sell is Canadian operating business, Blackspur Oil Corporation, for AUD 83 million, subject to certain adjustments on closing, which is expected to occur in later February 2024.
Prior to the announcement, the shares were trading at ~ 6 cents, a 50% discount to the sale price achieved. As the transaction is a cash sale, Calima has announced it will distribute no less than 85% of the proceeds from the sale back to Calima shareholders via a capital return.
The next 4 weeks will be very interesting for the Company, as we have heard that there were a number of bidders for Blackspur, and we may see one of the underbidders make a bid for Calima to acquire the Blackspur business.
WCS heavy oil blend markets have seen significant improvement since the beginning of the year. Blackspur’s oil production closely tracks the WCS price; in Brooks, the Company receives a premium price, while Thorsby gets a discount on the WCS price. According to the Company, in 2023, WCS was in strong demand mainly due to supportive markets like PADD 2 (Midwest U.S.) and PADD 3 (Gulf Coast U.S.). This demand was driven primarily by bottom-of-the-barrel products like residual fuel oil, exercise to refill the U.S. Strategic Petroleum Reserve, and reduced imports of Maya in the U.S. Gulf Coast as increased refining capacity in Mexico.
Figure 4: Historical WCS Hardisty, WTI CMA Monthly Prices
Calima Energy will directly benefit from the rise in oil prices.
Impressive Production Growth and Financial Insights
- Calima Energy has achieved a remarkable 40% increase in the production base since the acquisition in 2021
- Calima’s stock is fundamentally robust with positive free cash flow generation. Currently, the stock is ranging below 30 on 14 days Relative Strength Index (RSI), which means the stock is in the oversold zone that creates a golden opportunity for the investors to buy
- Calima Energy’s share price was trading at AUD 0.065 as of January 4th, 2024
- The Company has a market capitalisation of AUD 40.67 million, with 625.72 million issued shares
2. Carbonxt Limited
Figure 5: Carbonxt Limited – Emission and Mercury Control Products Company
Carbonxt Limited (ASX: CG1) is positioned to address the pervasive issue of persistent ‘forever chemicals’ in water. Carbonxt stands as a key player in combating environmental pollutants. Specialising in advanced activated carbon solutions for air and water filtration, Carbonxt is known for its continuous innovation and commitment to providing effective, non-corrosive, and efficient products.
Rapidly Increasing Activated Carbon Prices
In Activated Carbon Powered and Pellet products, robust demand was enough to raise prices significantly in the last 12 months. There is considerable intellectual property in making Activated Carbon to address individual use cases and pricing ranging from USD 2,000 to USD 6,000 per ton as per the quality. AC Granular demand is expected to rise due to new EPA regulations. Carbonxt Group Limited is securing an average price above USD 4,000 per ton for Activated Carbon Pellets. Public announcements from other activated carbon groups in respect of price increases include:
- Calgon announced price increases of 15% -40% in Dec 2022.
Figure 6: Florida Utility – PAC Winning Bid Over Time
Collaborating with Kentucky Carbon Processing, LLC (KCP), final documentation has been signed for constructing an advanced activated carbon facility in Kentucky, set to be operational in early 2024, minimising risks and expediting completion.
Carbonxt has expertise in producing two products of activated Carbon: Powered and Pellets. Based on product specification, Carbonxt has a USD 290 million US market size to cater with a 5% market share. Recently, there have been several regulatory changes announced by the Environmental Protection Agency (EPA) to increase the regulation of per- and polyfluoroalkyl substances (“PFAS”). The NewCarbon JV facility will expand the Company’s addressable market, focusing on water treatment.
Figure 7: Carbonxt’s Product Total Addressable Market
Carbonxt Group will explore new opportunities in water utilities. Across the United States, there are 50,000 water utilities, and 4,000 of them are servicing a customer base of more than 10,000 households.
Figure 8: Data on United States Water Utilities
Carbonxt’s potential to perform
- The new facility marks Carbonxt’s strategic entry into the liquid phase of the activated carbon market, targeting the utility water sector. Anticipated market growth ranges from USD 300 million to USD 900 million
- Carbonxt’s share price stands at AUD 0.065 with a 52-week range of AUD 0.045 – AUD 0.099 as of January 4th, 2024
- The Company has a market capitalisation of AUD 18.54 million, with 285.29 million shares issued
3. Platina Resources Limited
Figure 9: Platina Resources Limited – Gold Focused Explorer
Platina Resources Limited (ASX: PGM) is a gold exploration company based in Western Australia that aims to discover gold deposits exceeding 1 million ounces. The Company has key projects in the world’s most prolific mineral provinces. Platina offers exposure to robust fundamentals and substantial potential gains from successful discoveries.
Platina’s major program will drive value creation for the investors.
- In 2024, Platina will drill two projects: Xanadu and Beete
- The Company has Cash of ~ AUD 10.5 million to fund the drilling programme
- Potential additional milestone payments from scandium sale – AUD 11 million
Platina resources will be benefited from the robust momentum in the gold prices. Estimation of the United States fed rate cuts in the next year, 2024, pumps the demand for gold, which resulted in the current price spike (Were traded at USD 2,047.60 per Ounce on January 4th, 2024)
The Company’s exploration focus, strategic investments, and presence in key mining regions position Platina Resources with considerable growth potential in the dynamic and lucrative gold exploration sector.
Reason to look after Patina Resources Limited
- Platina Resources is well-positioned with a robust financial foundation, AUD 10.5 million in cash
- The Company is maintaining a debt-free status
- Platina Resources’ share price stands at AUD 0.02 with a 52-week range of AUD 0.017 – AUD 0.038 as of January 4th, 2024
- The Company has a market capitalisation of AUD 12.46 million, with 623.18 million issued shares
4. VRX Silica Limited
Figure 10: VRX Silica’s Top Silica Sand Projects
As the world’s second-most consumed resource, silica sand is integral to various industries, including glass manufacturing, concrete production, and high-tech applications like solar panels and smart screens.
VRX Silica Limited (ASX: VRX), with increasing demand for silica sand, particularly in emerging markets, is well-placed to harness the opportunities and benefit from the growing demand.
The Company is demonstrating high-tech ultra-clear glass production capability from its Muchea Project.
Figure 11: Silica Sand Market Outlook
The Company has a portfolio of high-quality silica sand projects in Western Australia. These projects, including Arrowsmith North Silica Sand, Arrowsmith Central Silica Sand, Muchea Silica Sand, and Boyatup Silica Sand, provide VRX Silica with a diversified and valuable asset base.
The Arrowsmith North Project, VRX Silica’s most advanced venture, is scheduled to commence production in 2024, subject to environmental approvals.
What makes VRX Silica attractive?
- VRX Silica recently raised AUD 3 million through a mix of AUD 1.5 million share placement and an AUD 1.5 million share purchase plan to support its projects
- On October 31, 2023, the company took a significant step by responding to public feedback on the Environmental Review Document (ERD) for the Arrowsmith North project, submitted to the Environmental Protection Authority (EPA)
- The awaited environmental approval for Arrowsmith North is a crucial milestone
- VRX Silica’s share price was trading at AUD 0.10, within a 52-week range of AUD 0.085 to AUD 0.180 as of January 4th, 2024
- The Company has a market capitalisation of AUD 58.33 million with 583 million issued shares
The Final Words
From oil and gas production to emission control, gold-silver exploration and silica sand project holding companies are attractive ASX stocks that showcase the potential to create wealth for investors. Explore the stocks above on ASX in 2024, as the stocks have the potential to grow with flourishing sectors.
Stay tuned with Colitco for the latest investment news and Australian stock market updates.
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