This is ShareTalk’s New Year’s digest; a place where we look at some of the most promising small-cap companies across the risk spectrum to consider in the first quarter of the new year.
To start with, the good news is that 2024 is shaping up to be a much better year for the markets than 2023. CPI inflation is down to 3.9%, the markets are pricing in 125bps of rate cuts over the next 12 months, and loosening monetary policy should start to see institutions and High Net Worth investors come back to risk assets.
In theory.
Without further ado:
Top 20 small-cap stocks to watch
- Union Jack Oil (LON: UJO) Down 28% year-to-date, Union Jack has arguably been beaten down by the wider macroeconomic environment — the business has done well on an operational level this year. From delivering $17 million in net revenue from Wressle to the recent positive Biscathorpe decision, to its acquisition of 3.22% of Beacon Energy, all seems to be smooth sailing. January should see investors updated on the Wressle CPR alongside future oil production rates.
- Kavango Resources (LON: KAV) Kavango recently secured a £6 million investment from Purebond — granting them a >50% stake in the company. Access to this capital will allow Kavango to explore its asset base, but access to the two billionaire brothers behind Purebond is perhaps just as valuable. The company recently acquired six prospecting licenses in Botswana’s Kalahari Copperbelt, where it’s started a helicopter geophysical survey, and it’s also taken over three promising gold assets near Bulawayo in Zimbabwe.
- ECR Minerals (LON: ECR) The near-term catalyst for ECR is clearly the 1,200 metres of reverse circulation drilling currently being conducted at around 10-12 locations around Creswick. Assay results should come back within Q1 2024, and given the small market capitalization, any promising results could see significant movement. It’s also worth noting the recent sale of non-core assets, the proceeds of which, in the words of management ‘should exceed our G&A expenses for the coming year.’
- First Class Metals (LON: FCM) FCM has various exciting gold assets under its belt, but like ECR the company is currently in the midst of a 500m drilling campaign at its Zigzag lithium property. Initial photo evidence appears promising, and the company has already seen spodumene in all nine drill intersections. FCM recently used the proceeds of a £603,000 share lending agreement to both pay for the drilling and repay a previous £500,000 CLN in full.
- Poolbeg Pharma (LON: POLB) Up 50% year-to-date, Poolbeg Pharma’s flagship POLB 001 has certainly captured the market’s attention as a potential therapy for Cytokine Release Syndrome, associated with cancer immunotherapies. But less discussed is the AI developments — the company’s artificial intelligence led programme has identified a number of promising RSV drug candidates for further analysis — and this could be just the start of a revolutionary clinical approach.
- hVIVO (LON: HVO) hVIVO has nearly doubled in value in 2023; not bad in a market where most companies have struggled to deliver any growth at all. The recent £16.8 million full-service RSV contract with a ‘top five global pharma client’ has certainly helped, and trading remains ahead of guidance. Perhaps the best indicator of where 2024 leads is the recent announcement that the business is planning a new state-of-the-art facility, predominantly funded by clients, to meet growing demand. Sometimes it’s best to sell shovels.
- Unicorn Mineral Resources (LON: UMR) Investors in the public markets may not know this term, but private markets put a lot of stock by a ‘unicorn’ — a company worth over $1 billion. It’s called a unicorn for its rarity; companies rarely get to this size without listing. This particular unicorn is a long way from $1 billion, and is also publicly traded, but it does have good news to share. UMR hits investor radars last week when it revealed that the indefatigable Jason Brewer was coming on board as an Executive Director, while it simultaneously raised £573,000 for future developments. Brewer tends to hit the road running, so news flow can be expected in Q1.
- Marula Mining (AQSE: MARU) Brewer is also CEO at Marula Mining — which has enjoyed a stellar run in 2023. The company now has ore sorters on site at Blesberg and it has taken the opportunity to massively expand its land footprint at various projects across the year. 2024 could be Marula’s pivotal year; revenues need to start flowing from Blesberg to reflect the investment in drilling and equipment — and investors are currently waiting for results from the recent 1,250m Phase 2 drilling program. These assays are expected to be received next quarter.
- NEO Energy Metals (LON: NEO) Everywhere I look, I see his face. No, I’m not talking about Iron Man, but the PR machine that is JB. Given his role as Non-Executive Chair at NEO, investors might want to take advantage of the share price dip. NEO holds up to a 70% interest in the Henkries uranium project in South Africa, where it is currently planning to update the existing feasibility study and increase the mineral resource estimate. Here’s some context: Henkries has already had $30 million spent on historical exploration, has a current MRE of 4.7 million pounds of uranium, and uranium is closing in on $90/lb.
- Greatland Gold (LON: GGP) Greatland just released an updated Mineral Resource Estimate for the Havieron asset to 8.4Moz AuEq, an increase of 1.9Moz AuEq compared to the previous estimate from 2022. The share price then promptly fell by 6.5%. Of course, there are various wheelings and dealings going on in the background, including the critical question over whether Newmont plans to retain or sell its 70% stake in the project, and to who. But the bottom line is this: If this was a new 1.9 Moz AuEq discovery by a different company, how would the market have reacted?
- Novacyt (LON: NCYT) Novacyt used to be the stuff of dreams for biotech small cap investors — rising from around 7p in October 2019 to 1,194p a year later. There have been worse investments. The acquisition of Yourgene has helped ameliorate the fall this year, alongside the recent EU IVDR accreditation for its DPYD genotyping assay, which supports the identification of cancer patients at risk of suffering a severe, and potentially life-threatening, reaction to common chemotherapy treatments.
- Avacta (LON: AVCT) AVA6000 Phase 1A data saw a muted market reaction, but informed investors no longer care about share price movements. The reality is that a clock is ticking for a buyout at a significant premium — you can’t go about boasting about the ‘Holy Grail’ of oncology treatments without drawing attention to yourself. It’s hard to pick out any single piece of data from the deck as it all looks good, though it’s worth remembering the caveats: Avacta will likely need to raise some cash soon and AVA6000 is still in the early days. CEO Alastair Smith has previously been relaxed about the financing question, but this will need to be addressed.
- Genedrive (LON: GDR) Genedrive recently announced initial orders of its MT-RNR1 products, shortly after announcing commercial distribution agreements for its test for antibiotic induced hearing loss. Initial orders will support state evaluation activities — with the idea being that more extensive sales will occur in the near future. There’s also the stroke test FDA partner to be announced, which will doubtless see more interest. On the other hand, funding may be an issue. Cash is always needed to scale and Genedrive will need to explain to investors how this will be achieved.
- Ondo InsurTech (LON: ONDO) Ondo’s LeakBot is the ‘new tech’ talk of the town, and with good reason. It solves a problem that companies have spent decades trying to solve, and partnerships with clients the world over including Fortune 100 insurance company Nationwide in the United States are likely just the start of a great story. The only cloud on the horizon is how it plans to scale on the journey to become a global company — this is both expensive and complex.
- ARC Minerals (LON: ARC) is flat for the year. This is a bit mad when you consider it has managed to sign an outrageously good JV with Anglo American to explore its copper belt claims in Zambia. Indeed, I was a bit suspicious about just how good the terms were — that is, until Anglo’s own copper guidance downgrade sent the major falling by 20% in a single day. Remember, the UK and Zambia recently signed a MoU to support the mining industry; and ARCM’s assets include the top seven ranked targets of the 30 old Kabompo Project targets — number 22 on the list eventually became FQM’s world class Sentinel copper mine.
- Tertiary Minerals (LON: TYM) Tertiary has signed a JV with Kobold (a big gun) to explore the Konkola West Copper Project, adjacent to the major Kokola copper mine and also the Migomba copper deposit where Kobold has already been drilling. Stage 1 of drilling (2,000m) should start within H1 2024, and success will see TYM either fall to a 20% interest in the asset, or to a 1% net smelter royalty for 13 years post-production (terms and conditions etc). While the JV terms may seem one-sided, it’s far better to have a small percentage of something than 100% of an untested patch of dirt. There’s also the Mukai Project — adjacent to ARCM’s claims, Sentinel, and Tirosa — which already benefits from a data sharing agreement with FQM.
- Power Metal Resources (LON: POW) There are many arrows in the Power Metal quiver, but three to highlight as immediate catalysts going into Q1 2024 are: potential grant funding for Golden Metal’s Pilot Mountain as its majority shareholder, the Uranium Energy Exploration IPO of the Athabasca uranium assets, and a new drill campaign to target a significant anomaly at Molopo. Pilot Mountain is the largest undeveloped tungsten deposit in the United States, and the critical mineral may be due a Chinese export ban. Meanwhile, as noted above, uranium is on a bull run — and the when the mineral runs, it flies.
- Premier African Minerals (LON: PREM) is the poster child for high risk, high reward on AIM. CEO Geroge Roach is out of shares to issue, but appears capitalised to the end of March 2024, where the implementation of the new ball mill at the Zimbabwe-based Zulu Project is being trumpeted as the final fix before nameplate production of 4,000tpm of SC6. Investors (and the company’s offtake partner), by this point, will have experienced a year-long delay. Success could see the stock skyrocket to all time highs, but failure will create a crisis of confidence. I suspect the phrase ‘I told you so’ will be shouted from the rooftops from April — either way.
- Sovereign Metals (LON: SVML) has an exceptional investment case. It has the largest rutile deposit in the world, the second-largest graphite deposit in the world, Rio Tinto on board as 15% shareholder, a Pre-Feasibility study with some outstanding numbers, and a management team which has enjoyed serious success elsewhere in the past. The flagship, Kasiya in Malawi, could be bought by Rio at any time — and the market is apparently asleep to the opportunity.
- Acuity RM Group (LON: ACRM) Acuity’s STREAM risk management platform has won multiple public sector contracts. Getting a public sector contract is like getting your first grad job — hard initially, but once you have one, it’s easy to get another. Yes, these are early days, but the company deserves a spot on this list. Contract renewals are at 96% with a gross margin of 92%. There are no warrants or CLNs (the death of many a growth stock), and progress has been impressive thus far. A little-known dark horse for 2024.
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This article has been prepared for information purposes only by Charles Archer. It does not constitute advice, and no party accepts any liability for either accuracy or for investing decisions made using the information provided.
Further, it is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
