Soaring commodity prices have resulted in a surge of capital flood into mining exploration expenditure through 2020 and into 2021, according to Bell Potter.
Bell Potter released a research report on 12 March which highlighted the allocation of fresh funds into drilling activities and new discoveries. While small-cap ASX shares are speculative in nature, the broker sees significant upside in explorers that are taking a step closer to becoming producers.
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Bell Potter rates these ASX shares as a 'speculative buy'
Chalice Mining Ltd (ASX: CHN)
Chalice Mining's assets currently comprise two new and significant discoveries, the Julimar Nickel-Copper-PGE project in Western Australia and the Pyramid Hill gold project in Central Victoria. The company also owns a number of minor exploration projects and royalty interests relating to other metals.
In late January, Bell Potter noted that the latest drilling infills confirmed a "very significant global scale PGE-Ni-Cu-Co [PGE, nickel, cobalt and copper] deposit with extremely favourable logistics and important shallow oxide zones". The broker looked forward to ongoing work which will continue to extend and better define mineralisation.
A speculative buy rating with a $5.60 valuation was maintained on 28 January. At the time of writing, the Chalice share price is trading 1.14% higher at $4.45.
Liontown Resources Ltd (ASX: LTR)
Liontown is a battery metals exploration and development company with three core projects.
The company is currently progressing through a definitive feasibility study on its Kathleen Valley lithium project in Western Australia. Kathleen Valley is noted as the only independent, globally significant, spodumene-related, hard rock lithium resource in Australia. An updated pre-feasibility study announced in early October 2020 highlighted strong economics for the project with a net present value of $1.12 billion and development capital costs of ~$325 million.
The Moora project is still undergoing significant drilling activities for gold, PGE, nickel and copper mineralisation. This project is in its early days but finding success with multiple gold anomalies defined.
The Buldania lithium project in Western Australia is a relatively new project where work will focus on expanding the existing mineral resource.
Bell Potter believes that the Kathleen Valley lithium project is the key support for its current valuation. It also believes further exploration success at Moorna could "elevate this project beyond its current early-stage ranking" and the project's proximity to Chalice Mining's "world-class Julimar discovery, adds further appeal".
The broker retained a speculative buy rating with a 55 cent valuation back on 3 March. As of writing, the Liontown share price is trading 0.54% higher at 46.75 cents.
