Why is Australian Strategic Materials (ASX:ASM) share price higher today?

The Australian Strategic Minerals Ltd (ASX: ASM) share share price has underperformed in 2021 despite its list of operational achievements

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The Australian Strategic Materials Ltd (ASX: ASM) share price has nudged 1% higher on Thursday after the company released its March quarterly activities report

Australian Strategic Materials is an integrated materials business and emerging ‘mine to manufacturer’ producer of critical metals. The company owns the Dubbo project in NSW, a proven long-term resource of rare earths.

Currently, the company is developing its metallisation plant in South Korea to produce a range of high-purity metals and alloys. 

At the time of writing, the share price has retreated slightly to $4.82, up 0.84%. 

What’s driving the Australian Strategic Materials share price?

Australian Strategic Materials has continued to progress its key Korean Metals Plant following the signing of a Memorandum of Understanding (MoU) with local provincial and city government bodies

The Korean Metals Plan will produce and supply titanium and key rare earth metal alloys to the South Korean market. This comes as part of a broader global move away from China as a key rare earths supplier.

The company’s board has approved the progression of the plant with the initial phase estimated to cost US$9.9 million. Small scale production of metals is expected to commence in the second half of calendar year 2021. The targeted project of titanium powder and rare earths is expected to ramp. This will take production up from 582 tonnes in 2021 to 4,282 tonnes in 2022. 

Current designs for the plant includes planned production levels of 5,200 tonnes per annum. The second phase of capital expenditure will see the installation of a second titanium line. There will also be additional neodymium lines upon the execution of offtake agreements within the South Korean manufacturing sector. 

The Dubbo project

The Dubbo project is ready for construction. All major state and federal approvals and licences in place, alongside a proven process flow sheet and solid project economics. The company is working through an optimisation study, undertaking engineering and test work during the March quarter. The optimisation study is expected to be completed in 3Q21. This will allow time for re-scoping and potential discussions with South Korean parties interested in participating in its build, own, and operate model. 

With everything coming together, the company is also focused on the delivery of metal offtake agreements with titanium consumers and magnet producers in South Korea. Discussions continue to take place with various parties to address the supply of these materials.

Furthermore, the materials are considered critical to the country’s manufacturing sector. The company is progressing discussions with both Korean and global suppliers with the focus on securing binding and committed agreements. 

Why has the share price underperformed in 2021? 

Despite the positive operational progress from the company, the Australian Strategic Materials share price has slumped 25% year-to-date. With that said, the company made its ASX debut on 30 July 2020, where it has run up more than 250% since. 

Recent share price dragging factors could include its $91 million capital raising at a price of $4.80 per share as well as a sharp sell-off from rare earth producer, Lynas Rare Earths Ltd (ASX: LYC)

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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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