A heavy sell-off on Thursday weighed on the ASX 200 stocks. Indeed, the week ended lower after a few blue-chip stocks fell. The Australian benchmark lost 116.3 points, or 1.5%, to $7,406.6 this week, despite a half a per cent advance on Friday.
Despite the enduring correction on the broad market, we think it is not the time to panic, rather it may be the time to seize the occasion to load up your portfolio with some future earnings winners. Explore our list of top ASX 200 stocks to get better market insights.
Our List of top ASX 200 stocks to Buy in September 2021
The world is changing rapidly. Many factors are shaping our future. First of all, the majority of the nations on the planet are committed to tackling the urgent issue of climate change. Hence, this will require all our industries to shift to renewable energy.
For that, it will require electricity generation and energy storage technology. To create those techs, certain resources are crucial such as aluminium, nickel, copper, and lithium. But the most important one might be the rare earth element. Given the importance of this element in the fabrication of magnets and the composition of batteries, we believe rare-earth to be a tremendous long-term investment.
We are on the verge of the fourth industrial revolution. Let’s look at two companies that we like, which could play a crucial role in the production and supply of these resources of the future.
Alumina Ltd (ASX: AWC)
Alumina invests worldwide in bauxite mining. The company refines and produces aluminium through its 40% ownership of Alcoa World Alumina and Chemicals (AWAC). Alcoa owns the remaining 60% of AWAC. The company has assets in different parts of the world, notably, refineries in Australia, Brazil, and Spain to name a few. Additionally, AWAC has a 55% interest in the Portland Aluminium smelter in Victoria.
It is important to know that bauxite is the main source of aluminium. This resource may face a potential shortage in global supply due to a recent military coup in Guinea. As a result, political instability might disrupt bauxite exports and consequently lift its price. That’s where Alumina comes to be an opportunity. Thus, Australia stands to benefit the most given its position as the world’s second-largest bauxite explorer.
Furthermore, aluminium demand has recovered in 2021 and prices are at multi-year highs. In fact, around 60% of China’s bauxite consumption is imported and this is where Alumina stands to benefit massively.
In its last earnings report, Alumina registered a stunning operating performance. The firm reported record production of bauxite and aluminium. Consequently, Alumina increases its dividend to shareholders by 21%. What we like about the company as well, is that it has a rock-solid balance sheet. Indeed, Alumina has no debt and is well-positioned to maintain consistent returns. Adding to that, the firm is experiencing a strong market outlook for the commodity and production at record levels. It goes without saying that Alumina brews an excellent investment.
Lynas Rare Earths Ltd (ASX: LYC)
Lynas is the second-biggest rare earth’s producer worldwide. China is the leading rare earth producer with about 57% of the global output. Considering that, Lynas is a giant. The company is the largest rare earth producer of scale outside of China.
Mt Weld, Western Australia is home to one of the world’s highest-grade rare-earth mines. The concentrate produced here is then shipped to Malaysia where Lynas operates the world’s most advanced rare earth chemical processing plant in the world.
Rare earth elements play such an important role. We don’t often think, but this element can be found in the everyday object around us. For instance, this element is in your smartphones, cars, electrical appliances and computers to name a few.
Oh, fun fact – Approximately 1 kilo of rare earth metals goes into every single EV that is manufactured! The rare earth oxide demand is estimated to grow at a 10Y-CAGR of 9.7%. Moreover, the value of this mineral is estimated to reach US$16 billion by 2030.
We do not like Lynas only for its rare earth exposure, but also for its outstanding execution. Hence, Lynas is working towards diversifying its business by 2025. There are four key areas for this plan:
- Ramping up production
- construction of new production facilities
- facility upgrades in Malaysia
- and stepping up its US operations.
These initiatives are being taken with a vision to become the supplier of choice to its strategic customers. Furthermore, Lynas is projecting an NdPr production target of 10,500 tonnes annually by 2025. The opportunity that awaits Lynas is “as rare as” Rare Earth itself. Lynas is very well-placed to get in on what looks like the next gold rush!
