I've written previously about Australian Bauxite Ltd (ASX: ABX) and ABM Resources NL (ASX: ABU), with the former my Top Stock recommendation for September, and the latter my Top Stock recommendation for October (released tomorrow).
Despite a sell-off on the ASX, both companies have the potential to explode in size as they transition from explorer to producer.
Take for instance, ABM Resources, which today released an announcement forecasting production of 50,000-60,000 ounces of gold in the first full year of production (FY16).
With all-in costs predicted at $750-$870 per ounce recovered, ABM has a significant profit margin that affords considerable protection from further falls in the price of gold.
Further prospective fields with high grade drill results also give ABM ample scope to expand its mineral resources beyond the 640,000 indicated and inferred ounces at present.
While royalty discussions with the Northern Territory government have not been concluded (which could potentially impact production costs), a conservative assumption of $200/g profit at 50,000 ounces sees ABM earning $10 million in its first year for a modest Price/Earnings ratio around 9.
With the prospect of a slow-down in China and ultra-low interest rates globally, I also find it unlikely that the world has seen the last of the inflationary and security concerns that traditionally drive the value of gold.
But if you are bearish on gold, the macro factors for bauxite are considerably more favourable with rising supply outstripping demand and driving very high prices.
Australian Bauxite is in a perfect position to supply increasing demand through Asia and the Middle East, with 115 million tonnes of gibbsite (high quality) bauxite located close to alumina smelters, road and port infrastructure along the east coast of Australia.
With Chinese buyers sourcing bauxite as far away as Guinea and Brazil for prices up to $89 a tonne, Australian Bauxite shouldn't find it too difficult to snag a piece of the action.
Estimated production costs of up to $40/tonne also provide a significant buffer for when the market stabilises, while proximity to alumina smelters allow diversification into domestic refining if that business should grow in appeal.
The major obstacle to commencing production is the fact that Australian Bauxite has only $2 million cash at bank, which stacks up poorly against the $10 million plus investment required to begin operations.
However given the extremely high demand and huge ore reserves I find it inconceivable that Australian Bauxite will not be able to generate funding for its projects.
Thus it should come as no surprise to readers that I have purchased shares in both companies very recently.
However, you might not be shocked to learn that these two are far from being Australia's only quality resource explorers.
Despite all the doom and gloom about the decline in mining investment, the fact remains that Australia is home to many of the world's richest resource deposits, and the sheer quality of them allows us to compete even in tight resource markets.
That's why The Motley Fool's team of top analysts recently got together to pen a special report on Australia's 3 best speculative resource companies preparing to hit the big time (one of them already has!).
If more high-risk / high-reward ideas is what you're after, then this free report is exactly what you're looking for.