As of last Friday, Hudbay stock had advanced 4.3% since the start of the Iran war.Hudbay Minerals/Supplied
Following the start of the Iran war on Feb. 28, mining stocks sold off in March and have since been consolidating. Investors may be waiting to see if the conflict will force the Federal Reserve to raise interest rates to contain U.S. inflation expectations as energy prices rise. Insiders, however, are not waiting. They are buying.
The INK Basic Materials Indicator, which tracks the number of stocks in the sector with key insider buying versus the number with key insider selling over the past 60 days, hit a high for the year on May 5 at 2.64. At that point, there were slightly more than 2.6 stocks in the sector with key insider buying for every one stock with key insider selling. While not a foolproof rule, an indicator peak is typically bullish because it represents peak insider buying, which often takes place near significant support levels for stocks.
With insiders betting that the current environment represents a good time to accumulate mining stocks, today I look at three names that made it into the top 20 ranked mining stocks for May. All three are industrial metals names with market capitalizations that exceed $1-billion. The largest on our top 20 list is Hudbay Minerals Inc. HBM-T, with a market cap of almost $17-billion.
As of last Friday, Hudbay stock had advanced 4.3 per cent since the start of the Iran war. On March 27, the company released its annual reserve and resource update. On a company-wide basis, Hudbay touts 6.5-million tonnes of copper equivalent reserves based on assumptions that include copper priced at US$4.88/lb and gold at US$3,400/oz.
Following the report, three company insiders bought a total of 5,500 shares in the public market at an average price of $26.73. The biggest buyer was chief executive officer Peter Kukielski, who bought 4,000 shares at $26.71. He now holds 124,618 shares.
In early March, Hudbay announced a friendly takeover offer for Arizona Sonoran Copper Company Inc. in an all-share transaction. If the deal proceeds, Hudbay believes Arizona Sonoran Copper’s Cactus project will help Hudbay form the third-largest copper district in North America, as it advances its Copper World project.
Last December, Hudbay made a $14-million investment in Quebec copper miner Osisko Metals Inc., which also made our May top 20. Osisko Metals has a market cap of just over $1.3-billion. The company has been a leader in the basic materials sector, advancing 15.5 per cent since Feb. 28, as of last Friday.
On April 14, Osisko Metals OM-T released an updated resource estimate for its 100-per-cent-owned Gaspe Copper project in Quebec, which included over 10.7 billion pounds of copper and 673-million pounds of molybdenum in the measured and indicated categories. The inferred resources included just over 2.1 billion pounds of copper and almost 83 million pounds of molybdenum.
Since the report, five insiders have acquired a total of 339,777 shares in the public market at an average price of $1.56, while one insider sold 94,839 shares at $1.65 after exercising 233,333 options.
Osisko Metals is drilling again with the objective of converting the remaining inferred resources to the indicated category, and it is undertaking infill drilling in the updated pit shell and testing additional mineralization beyond current pit boundaries. The drilling will also test for depth extensions to the Porphyry Mountain deposit.
Of our three names, rare earth mining and processing firm Aclara Resources Inc. ARA-T, with a market cap of just over $1-billion, has been the big winner since the start of the Iran war, up 28.5 per cent as of Friday. The company debuted on the Toronto Stock Exchange in December, 2021, as it was advancing its Penco Module rare earth elements project in Chile.
The project soon became entangled in Chilean red tape, and Aclara withdrew its environmental impact assessment (EIA) application in 2022. Aclara resubmitted its EIA application for a third time in June, 2024, and yesterday, it finally received some good news. On Monday, the company announced it has received a Consolidated Evaluation Report from Chile’s regional Environmental Assessment Service recommending approval of the project’s EIA.
As Aclara was jumping through Chilean regulatory hoops, it also started work on its Carina heavy rare earth element ionic clays project in Brazil. On April 13, Aclara released the results of a feasibility study that envisions average annual production of 4,378 tonnes of rare earth oxides contained in a mixed rare earth concentrate (MREC) product containing 4.2 per cent dysprosium and terbium (DyTb) and 27.2 per cent neodymium and praseodymium (NdPr).
Based on an assumed initial capital cost of US$780.9-million (including contingency), the study estimates an after-tax net present value of approximately US$1.7-billion, at an 8.0-per-cent discount rate, based on Argus Media price forecasts.
Since the April 13 news, two insiders have acquired a total of 222,000 shares in the public market. The largest buyer was director Jorge Borne, who bought 200,000 shares at an average price of $3.39.
On the processing side, Aclara is advancing its Project Dynamo in Louisiana, which is designed to process high-purity MREC from the Carina Project into individual rare earth oxides. Aclara hopes to have key Project Dynamo approvals in place by October.
Ted Dixon is CEO of INK Research, which provides insider news and knowledge to investors.