As the world steers towards a more sustainable future, the surge in electric vehicle (EV) sales is turning industries upside down, and mining is no exception. Australia, famous for its treasure trove of minerals, finds itself right in the middle of this shift, which raises two questions. Firstly, are we about to see a new mining boom thanks to the growing demand for minerals essential for making EVs? Secondly, which stocks are best positioned to cash in on this opportunity?
The International Energy Agency recently released a report revealing some staggering statistics about electric cars. In 2023, sales hit a whopping 14 million units globally, making up 18 per cent of all car sales for the year. That’s a massive jump from just five years prior when electric cars were a mere 2 per cent of total sales.
So, what are the key minerals driving this EV frenzy? Rare earths, lithium, cobalt, and nickel are among the crucial components and with the continued growth of the EV market, many Australian mining companies are poised to cash in. Here are a few that stand out.
First, Lynas Rare Earths Limited (ASX:LYC) As the largest producer of rare earths outside of China, Lynas is in a prime position to supply materials to EV manufacturers worldwide. With the share price hovering around a historical fair value level of $6, there’s enormous upside potential if the share price begins to climb, presenting a huge opportunity for those who can time it right.
Next, we have BHP Group and S32. While these two companies are not solely rare earth miners, they produce many minerals needed in EV production, like nickel, cobalt, and lithium. Now, while BHP’s share price has been languishing sideways over the last couple of years, it is trading at a level of previous support of $42, meaning there is potential for the price to rise from these levels.
In contrast, S32’s share price experienced fantastic gains in April, having the strongest one-month performance since February 2022. This could potentially signify the beginning of the next long-term bull run.
Lastly, Pilbara Minerals and Mineral Resources are notable companies to watch, given their respective roles in lithium and cobalt mining. Their share prices are now starting to track higher after falling around 40 per cent, which historically signals the end of a down move for each stock.
What are the best and worst-performing sectors this week?
The best-performing sectors include Real Estate, Information Technology, and Financials, which are all up over one per cent. The worst-performing sectors include Consumer Staples and Energy, which are both down over two per cent, followed by Utilities, down just under one per cent.
The best-performing stocks in the ASX top 100 include Amcor and IGO, which are up over nine per cent, followed by Qube Holdings, up over seven per cent. The worst-performing stocks include Ampol, down over eight per cent, followed by Worley, down over seven per cent, and Block, down over six per cent.
What’s next for the Australian stock market?
With the All-Ordinaries Index showing a slight decline this week, the market appears to be at a critical juncture, with neither buyers nor sellers able to assert dominance. This suggests a pivotal moment in the market’s trajectory may be imminent. In my previous report, I highlighted 7,800 points as a key support level, and interestingly, since mid-April, the market has consistently held above this level, indicating strong support. However, despite several attempts in the last two weeks, the market has failed to break above the 8,000 point level, leading to a sideways movement.
It is evident that the market is at a crossroads and is poised for a decisive move in either direction. The longer the sideways movement persists, the more powerful the eventual breakout will likely be. The question now is, which way is it likely to break? Historically, the market tends to form a low during the May-June period. Therefore, based on this pattern, the probability of a downward breakout appears higher.
This scenario also aligns with my previous forecast of a downward move in May and June towards the 7,500 or 7,200 level. However, if the market manages to stay above the 7,800 level and breaks above 8,000 points in the coming weeks, it could reignite a bullish trend.
I would encourage traders and investors to closely monitor price action for any clues about the market’s next move, as I believe it will be significant. However, I do caution anyone thinking of jumping in too early. There will be plenty of time to profit when the bull run confirms it is back.
Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in bookstores and online at www.wealthwithin.com.au
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