Global Trade and Your SMSF: Five Stocks to Benefit from Australia’s Strategic Position in Critical Minerals & Defence

The U.S. has slapped a 25% tariff on steel and aluminium imports, and that’s got Australian exporters on edge. This is a tough hit for Australia’s mining and manufacturing sectors, making it harder for them to compete in the U.S. market. Markets reacted quickly, Australian mining stocks took a hit, with big names like BHP Group and Rio Tinto feeling the pressure. The ASX 200 also dropped, indicating broader investor concerns, especially with China being Australia’s biggest trading partner. Critical Minerals Offer a Silver Lining Despite the turbulence, there’s a big opportunity in Australia’s critical minerals sector. The U.S. is actively trying to cut its reliance on China for rare earth elements, and that plays right into Australia’s strengths. With more investment in domestic processing, Australia could solidify its role as a key global supplier. Defence Spending on the Rise Geopolitical tensions aren’t just reshaping trade, they’re also driving up defence spending. With agreements like AUKUS in play, major investments in military tech and nuclear submarines are expected to flow into Australian defence contractors, creating solid growth potential. Looking Ahead While the tariffs pose short-term challenges, long-term gains could emerge in sectors like critical minerals and defence. The U.S.-Australia partnership in these areas could open up strong investment opportunities, even if the overall market remains a bit shaky for now. Bottom line? Geopolitical tensions are creating winners and losers, but for those positioned in the right sectors, the long-term outlook remains promising. Let’s take a look at five stocks that could benefit from this environment in the critical minerals and defence space. Five Stocks Positioned to Benefit in Critical Minerals & Defence Santana Minerals Ltd (ASX: SMI) – Up +17% YTD Santana Minerals Limited (ASX: SMI) is showing a lot of promise, especially with its focus on the Bendigo-Ophir Project in New Zealand. This project spans 251 square kilometres in the gold-rich Central Otago goldfields, just 90 kilometres from Oceana Gold’s Macraes mine. That puts Santana in a great spot to potentially discover more gold. Additionally, the company’s Cambodian assets, which include two exploration licenses targeting gold, provide an interesting diversification for their portfolio. Recent Developments: Mineral Resource Estimate Update We’re encouraged by the recent Mineral Resource Estimate (MRE) update from Santana, particularly for its Rise & Shine (RAS) deposit. The new figures show a 7% increase in grade (from 2.35g/t to 2.52g/t) and a 6.4% increase in contained gold ounces. These are positive signs that the project’s economic outlook is improving. With the focus on higher-grade ore in the early stages of mining, the company could see higher feed grades, which should translate into better financial outcomes in the beginning. That said, we’re still cautious. As promising as these updates are, the project’s success still relies heavily on how well Santana executes future exploration and development stages. The updated Pre-Feasibility Study (PFS) will be key here—it aims to reduce pre-production capital costs and improve mining efficiency. While that’s great news, it’s important to remember that the project’s overall success is still up in the air until everything is fully realized. Financial Standing: A Solid Base Looking at Santana’s financials, we see a company with a solid foundation. As of the latest update, Santana holds around $31 million in cash, which should comfortably fund their ongoing exploration and development efforts. On top of that, they’ve converted 13.4 million options at $0.36 per share, with another 79.9 million in-the-money options available before they expire in February 2025. This gives Santana a strong financial base, which is a positive as they move forward with their plans. Approval Risks: A Key Factor One thing we do need to highlight is the approval process. Santana is working on securing Fast-track Approvals under New Zealand’s new Fast-track Approvals Act. This could speed up the environmental and regulatory approvals they need to move forward, which is great news. However, there’s still the risk of delays or unforeseen complications in getting those permits, and any issues with the early-stage infrastructure upgrades could create some uncertainty. The Bottom Line: Big Potential, But Proceed with Caution Overall, Santana Minerals shows a lot of promise. The updated MRE is encouraging, and with $31 million in cash and more capital available through in-the-money options, the company is in a strong financial position. But we do want to stress that this remains a speculative play. The risks, whether from the regulatory process, the execution of the development plan, or the volatility of the mining sector, are still significant. If everything goes according to plan, the upside potential is huge, but for now, we’re staying cautious. Lynas Rare Earths Ltd (ASX: LYC) – Up +8% YTD Lynas Rare Earths Limited (ASX: LYC) is in a great position to benefit from recent U.S. policies and the ongoing geopolitical tensions, particularly the trade wars between the U.S. and China. As a key player in rare earths production, Lynas is actively involved in mining and processing across Australia, Malaysia, and the U.S. With its focus on critical materials like neodymium-praseodymium (NdPr) oxides—used in the manufacturing of electric vehicle (EV) magnets, wind turbines, and other green technologies—Lynas is well set to capitalize on growing global demand. Geopolitical developments, especially in the U.S.-China trade relations, are giving the company additional tailwinds. U.S. Policies and Geopolitical Tensions The U.S.-China trade war has brought rare earths to the forefront, highlighting their importance not just for economic growth but for national security. The U.S. government has made it clear that it wants to reduce its reliance on China for these critical materials. This opens up significant opportunities for Lynas, especially as the company expands its operations in the U.S. with its Texas-based Rare Earths Processing Facility. We believe this is a major plus for Lynas, as the U.S. Department of Defence and government support create a strong backdrop for Lynas to grow in this region. The geopolitical landscape, with its trade uncertainties, has also underscored the importance of securing a stable and diversified supply chain for rare earths. As China is a dominant force in rare earth production, the U.S. and its allies, including Australia, are increasingly looking to reduce their dependence on Chinese supplies. Lynas, being an Australian company, is in a prime position to fill this gap, especially as governments push for more local and non-China-based sources of these materials. Financials and Performance Looking at Lynas’ financials for the half-year ending December 2024, we see that despite some market headwinds, the company has done quite well. They saw a 22% increase in NdPr production, reaching 2,969 tons, which helped drive up sales revenue to $254.3 million. The higher volume is impressive, but it’s important to note that market prices for NdPr dropped during this period, with the average price falling from USD 56/kg in December 2023 to USD 49/kg in December 2024. Even with the price dip, Lynas managed to increase its sales volume by 23%, focusing on high-value customers and products, which helped offset some of the pricing pressures. The company’s cost of sales increased by 29%, mainly due to the higher volume and a $5 million provision related to low-value inventory. But despite these challenges, Lynas maintained a solid cash position with $308.3 million in the bank. This gives the company a strong foundation to continue its expansion plans and tackle any market uncertainties head-on. Lynas invested $267 million in capital expenditure during the period, focusing on key growth projects like the Mt Weld Expansion and the Kalgoorlie Rare Earths Processing Facility. These projects are already starting to deliver positive results, with Stage 1 of the Mt Weld Expansion successfully integrated into operations, helping to improve product quality and efficiency. With further stages planned, these investments will significantly boost Lynas’ production capacity in the coming years. Growth and Operations Lynas has made impressive progress in its operations, particularly with the Kalgoorlie Rare Earths Processing Facility. Officially opened in November 2024, this facility is a major milestone for Lynas, as it’s the only downstream rare earths processing facility in Australia. The integration of the Mt Weld Expansion and the ramp-up of production at Kalgoorlie set Lynas up for continued growth. Additionally, the expansion of its mineral resources and ore reserves at Mt Weld gives Lynas a 20+ year mine life at the target production of 12,000 tons of NdPr finished product per year. This is a huge positive, ensuring long-term supply stability for their customers. Looking ahead, Lynas’ U.S. Rare Earths Processing Facility in Texas is another exciting development. The company is working closely with the U.S. Department of Defence to resolve some technical challenges, including wastewater management at the Seadrift site. This facility represents a crucial step toward diversifying the supply chain for rare earths, reducing reliance on Chinese sources and strengthening Lynas’ position in the U.S. market. Market Outlook The demand for rare earths is expected to continue rising, driven by sectors like electric vehicles, renewable energy, and defense. With its diversified production base, solid government backing, and commitment to sustainability, Lynas is in a great position to take advantage of these trends. Despite the current low pricing environment, Lynas has managed to keep its revenue stable, thanks to its strategic focus on high-value customers and products. The ongoing investments in expanding production capacity and optimizing operations will help Lynas weather the volatility in the market and emerge stronger in the future. That said, we see Lynas Rare Earths as being well-positioned to benefit from both short-term market fluctuations and long-term demand growth for rare earths. The company’s strong operational performance, backed by government support and strategic investments, makes it a key player in the global rare earths supply chain. As the demand for these materials continues to rise, Lynas’ continued growth and capacity expansion should provide solid returns for investors in the rare earths space. Trigg Minerals Ltd (ASX: TMG) – Up +170% TTM We see Trigg Minerals Limited (ASX: TMG) as an exciting but speculative opportunity in the critical minerals space. The company has made solid progress in antimony exploration, but its recent tungsten discovery is what really catches our attention. With China’s upcoming export ban on tungsten shaking up global markets, Trigg is in a position to benefit, but it’s still early days. While the potential is clear, there’s a long road ahead, and investors should remain cautious as the company works to firm up its resources and move toward commercialization. Antimony and Tungsten: The Hidden Value in Wild Cattle Creek Trigg’s Achilles Project, specifically the Wild Cattle Creek deposit, is already a standout in Australia’s antimony space. The deposit is the widest known in the country, with an updated Mineral Resource Estimate (MRE) showing 1.52 million tonnes at 1.97% antimony. That’s a solid base, but what makes things really interesting is the tungsten story. Historically, tungsten was overlooked in this deposit, but recent drilling has confirmed some impressive grades. A secondary vein system about 35 meters north of the main deposit has returned assays of up to 2.14% tungsten and 27.6% antimony, with broader zones averaging 13% antimony and 1.03% tungsten. This parallel structure wasn’t even included in the latest MRE, meaning there’s real potential for a resource upgrade. The deposit remains open along strike and at depth, giving Trigg plenty of runway to expand its resource base. China’s Export Ban: A Huge Tailwind—If Trigg Can Deliver Timing is everything, and Trigg’s tungsten discovery is happening just as China prepares to cut off exports of the critical metal in February 2025. With China supplying over 80% of the world’s tungsten, this move has sent shockwaves through global markets. Countries looking to secure alternative sources will be scrambling, and Trigg’s Wild Cattle Creek deposit could suddenly become very valuable. But before we get too ahead of ourselves, there are still major hurdles to clear. The tungsten discovery is promising, but it’s still early-stage. More drilling is needed to formally define the resource, and metallurgical testing will be key to understanding how efficiently tungsten can be extracted. Without that data, it’s tough to assess just how viable this project really is. While tungsten and antimony are front and centre, Trigg’s broader portfolio shouldn’t be overlooked. The company holds a strong position in Queensland, with its Drummond Gold Project spanning five granted exploration permits covering 540 square kilometres. On top of that, Trigg has a 90% stake in four additional license areas totalling 431 square kilometres. Drilling at the SW Limey prospect has already turned up some interesting results, with significant alteration zones intersected and historical sampling pointing to high-grade gold potential. While these assets are still early-stage, they add extra optionality to Trigg’s growth story. Funding and the Path Forward Like most junior explorers, Trigg relies on external funding to keep advancing its projects. The company recently raised $7.5 million through placements, which should cover its near-term exploration plans. However, with so much work still to be done, especially if tungsten becomes a major focus, we expect Trigg will need more capital down the line. The company’s ability to attract additional funding and potential strategic partners will be critical in determining how quickly it can move forward. Trigg Minerals has a lot going for it. The company’s high-grade antimony deposit is already a strong asset, and the tungsten discovery adds a whole new layer of potential, especially with China shaking up the supply chain. But while the opportunity is there, so are the risks. The tungsten story is still developing, and there are key unknowns around resource size, metallurgy, and overall project economics. For now, we see Trigg as a speculative but compelling play in the critical minerals space. If the company can continue to expand its resource base and prove up the tungsten potential, it could position itself as a key domestic supplier. But with plenty of work still ahead, investors should remain cautious and watch closely for the next round of drilling results and resource updates. Austal Ltd (ASX: ASB) – Up +18% YTD Austal Limited (ASX: ASB) is well-positioned for sustained long-term growth, driven by its strategic expansion efforts, strong financial performance, and an impressive order book. The company’s focus on strengthening its U.S. shipbuilding capabilities, diversifying revenue streams, and maintaining a solid financial foundation sets it up for continued success in both the defence and commercial sectors. Let’s explore the key factors that are likely to drive Austal’s growth in the coming years. Strategic Expansion in the U.S. Austal’s recent $200 million capital raise and the ongoing FA2 infrastructure expansion are key investments that will significantly enhance its U.S. shipbuilding operations, particularly for larger steel vessels designed for the U.S. Navy and Coast Guard. Given the U.S. government’s focus on modernizing its naval fleet, this move is perfectly timed to meet the increasing demand for advanced defence vessels. In addition to this, the $450 million contract from General Dynamics Electric Boat to build a submarine module fabrication facility further strengthens Austal’s role in the U.S. defence supply chain. This contract, along with a $152 million award from the U.S. Navy for supporting infrastructure, secures Austal’s position as a trusted partner in the U.S. defence sector, providing a reliable stream of future revenue. Growing Order Book and Diversified Revenue Streams Austal’s record $14.2 billion order book offers strong visibility into future revenue, helping to protect the company against market fluctuations. With long-term contracts spanning both defence and commercial markets, Austal is well-positioned to maintain a solid revenue base. A great example of this is the $270 million contract with Gotlandsbolaget for commercial ferry construction, which highlights Austal’s ability to diversify its revenue streams beyond defence projects. This diversification adds an extra layer of stability to the company’s financial outlook. Additionally, Austal’s focus on through-life services—such as vessel maintenance, repairs, and integrated logistics support—creates a steady stream of recurring revenue. This service-oriented part of the business helps to build long-term relationships with customers and ensures a reliable income well beyond the initial shipbuilding phase. Financial Strength Austal’s financial results for the first half of FY2025 further demonstrate the company’s solid performance. The 15.1% increase in revenue, a 33% rise in EBIT, and more than doubling of net profit to $25.1 million highlight how effectively the company is managing its operations and seizing growth opportunities. The company also benefits from a strong cash position, with net cash totalling $212.6 million and total reserves of $353.9 million. This financial flexibility gives Austal the ability to continue investing in infrastructure, research and development, and capacity expansion while maintaining stability in the face of economic uncertainties. Growth Opportunities in Australia and Asia Austal’s relationship with the Australian government presents significant growth opportunities. The Strategic Shipbuilding Agreement (SSA) is a key initiative that could secure long-term defence contracts for Austal’s Henderson, WA facility. If the company is successful in winning future defence contracts under this framework, it could significantly expand its order book. Austal is also involved in discussions around the Landing Craft (Heavy) program with the Australian Defence Force, which could lead to additional contracts and further solidify its position in the local defence market. Beyond Australia, Austal is well-placed to take advantage of the recovery in shipbuilding activity across Asia, particularly in emerging markets such as the Philippines and Vietnam. As shipbuilding demand picks up in these regions, Austal’s ability to secure contracts in Asia will enhance its global presence and diversify its revenue sources. Expanding its footprint in these markets not only provides a buffer against potential slowdowns in other regions but also strengthens Austal’s position as a global player in the shipbuilding industry. Long-Term Outlook Looking ahead, Austal stands to benefit from the ongoing U.S. defence spending and the increasing need for naval expansion. The company’s focus on innovation, including advanced shipbuilding techniques and modular fabrication, gives it a competitive edge that positions it well for future growth. Austal’s diversified order book, solid financial health, and ongoing investments in capacity and technology provide a strong foundation for continued success in both the defence and commercial sectors. Perseus Mining Ltd (ASX: PRU) – Up 16% YTD With the ongoing concerns surrounding tariffs and the unpredictability of the Trump administration’s policies, gold is becoming an increasingly attractive asset. Gold has traditionally been seen as a safe haven during times of political and economic instability, and this moment is no different. Perseus Mining Limited (ASX: PRU) stands out as a strong contender for investors looking to gain exposure to gold, especially given the current climate of uncertainty. Why Gold Is Gaining Attention The ongoing volatility surrounding U.S. trade policies, particularly with China, has created a cloud of uncertainty in the markets. The Trump administration’s unpredictable stance on tariffs is making global economic conditions more fragile, which is why many investors are turning to gold for stability. Historically, when uncertainty rises, so does the demand for gold, as it is often seen as a hedge against inflation and economic disruptions. In this context, gold has the potential to outperform, especially as the U.S. government’s policies continue to evolve. Perseus Mining’s Solid Position Perseus Mining presents an excellent way to gain exposure to the gold sector. The company operates three gold mines in West Africa: Edikan in Ghana, and Sissingue and Yaoure in Côte d’Ivoire. It also owns the Meyas Sand Gold Project in Sudan, which gives the company a diversified geographical footprint. This is a key strength, as it reduces the risk of being overly reliant on one market or political environment. In terms of financials, Perseus has been executing well. For the six-month period ending December 2024, the company produced 253,709 ounces of gold. Despite inflationary pressures pushing up costs, Perseus benefited from a strong hedging strategy and a higher average sales price for gold. The company’s average sales price was US$2,350/ounce, significantly higher than the previous year’s average of US$2,000/ounce. This increase in gold prices, combined with solid production numbers, led to a 19% increase in revenue, from US$489 million in 2023 to US$581.8 million. Looking at Perseus’s mines, the performance has been solid across the board. At the Yaoure mine in Côte d’Ivoire, the company produced 123,158 ounces of gold at an All-In-Sustaining Cost (AISC) of US$1,124/ounce. This was within the high end of their market guidance, which was 108,000 to 124,000 ounces. The AISC was also lower than their upper AISC guidance, which was US$1,175 to US$1,275/ounce, making Yaoure a strong contributor to the company’s overall performance. The Sissingue mine, also in Côte d’Ivoire, produced 33,917 ounces at a higher AISC of US$1,701/ounce. This was slightly above their AISC guidance of US$1,500 to US$1,600/ounce, primarily due to lower ore production and higher waste mining at their Fimbiasso pit. While this was a bit higher than anticipated, it still aligns with the volatility in the market, which investors need to be mindful of. At the Edikan mine in Ghana, Perseus saw its best performance, producing 96,634 ounces at a remarkably low AISC of US$1,022/ounce. This was at the lower end of their guidance, which was US$1,200 to US$1,300/ounce. The low AISC at Edikan reflects the efficiency of Perseus’s operations in Ghana and its ability to keep production costs in check, even as overall costs rise elsewhere. Strong Financial Position One of the key factors that make Perseus Mining attractive is its solid financial position. The company ended the half-year with a net profit after tax of US$201.1 million, a 22% increase from the previous year’s US$164.7 million. This growth was supported by a 26% increase in gross profit, which came in at US$265.3 million for the period. The company’s strong operating margin, driven by higher gold prices and strong production, helped them generate net cash from operating activities of US$247.6 million, up 17% from US$211.2 million the year before. With cash on hand of US$628.5 million as of December 2024, Perseus is in a strong position to weather any volatility in the market. They also hold 29,078 ounces of gold bullion worth US$76 million, which provides an additional cushion in the face of market fluctuations. Their solid balance sheet and cash reserves allow them to remain agile and make strategic investments when opportunities arise. A Strong Pick for Gold Exposure In light of the ongoing political uncertainty and economic volatility in the U.S., Perseus Mining offers an attractive opportunity for investors looking to gain exposure to gold. With its diversified operations across West Africa and a solid track record of meeting production targets, Perseus is well-positioned to benefit from rising gold prices.