ASX Resource Stocks: Party Time! — Resources to Watch in 2021
Here’s one thing we can say.
Nobody expected the December iron ore price to come wrapped in a Christmas bow and a stocking jammed full of royalties and dividends.
It hit over US$140 last week.
There is now a mighty river of money flowing out of the Pilbara and lifting BHP Group Ltd [ASX:BHP] and Rio Tinto Ltd [ASX:RIO] into new highs.
My goodness, Western Australia has a few bright years in front of it.
All this mining wealth is going to gush all over the state, especially Perth.
Don’t forget the producing gold miners are still spewing cash out too.
That’s even with the recent pullback in the price.
Resource Stocks to Watch on the ASX
And it won’t be long before the lithium names start joining the party. The stocks are already running on the stock market.
But they’re mostly moving on expectations currently.
The actual lithium price isn’t quite there yet to create the big dividends and cash flows that we’re currently seeing in gold and iron ore. But they’re coming.
Can it get any better for Perth and Western Australia?
Actually, it can. One small sector you’re unlikely to have heard of is called silica sand. It’s used in glass and construction.
There are several projects starting up over in WA based on this.
It’s on the expectation that there is a huge boom in infrastructure spending coming around the world.
It’s early days yet, but I suggest you start following it.
Mineral wealth abounds in Western Australia and a lot of it is going to show up in property values. You don’t have to believe me on that.
Louis Christopher is a well known property analyst. Every year he produces his Boom Bust report.
It came out last week. What’s his take?
The central scenario is that the federal government will extend JobKeeper and continue to shore up the market. That could lead to price gains of 9%.
But the future is not fixed. It’s possible that COVID-19 breaks out again and these recently announced vaccines turn out to be duds.
Either way, Louis Christopher is not blind to the implications of what the powers that be are brewing: a massive disconnect between property owners and renters.
You cannot gift windfall gains to one part of the population without an effect on the other.
I’ve written the same thing in these notes for nearly 10 years now. For a long time, I gave the equation as a simple one: be a renter, or a Rentier.
It’s a simple playbook, but effective. It makes predicting the future a little easier.
When the seriousness of the COVID breakout began to hit the share market, I told my colleagues that the response was predicable: the Australian government would ramp up the federal deficit to offset the contraction.
What I did not know was coming was this riotous iron ore party.
Anyone who backed that idea deserves all the capital gains and dividends currently in their pocket and still coming.
There is a lesson in this for Australia’s political class, which won’t be learnt.
It’s that the riches of the iron ore industry will not always be there to save Australia. We should be planning for a day without it.
The Norwegians did this with outstanding foresight and effectiveness when they discovered oil in the North Sea.
They now have over US$1 trillion in national wealth husbanded in their sovereign wealth fund.
Australia does not have an equivalent and no plans to create one.
Indeed, Australia now has a monstrous federal deficit. It’s made worse by the fact all the states and the private sector are saturated in debt too.
At some point the bill for all this will come true. But that day is not today.
Nor is 2021 likely to be that time either. So, the Australian economy will likely coast along just fine for the moment.
The opportunity across the resource space is starting to look prodigious. We have high interest across multiple different sectors such as nickel, copper, rare earths, and even uranium.
This is making for a plethora of investment and trading opportunities. I don’t see any reason for it to slow down in early 2021. That makes for a fine Christmas…because the presents might keep coming for a while longer yet.
Make the most of it! The stock market Grinch will appear at some point. But not today.
Editor, The Daily Reckoning Australia
PS: Why Australia is set to become the next ‘gold epicentre’ — which could result in a HUGE spike in Aussie gold stock prices. Click here to learn more.