Trader’s Café with Zak Mir: A Week In Small Caps, Sunday 18th September 2022

September is not famous for being a great month on the stock market. Ironically though, the glimmer of a Ukraine breakthrough versus Russia, perhaps gave the market something of a psychological boost, if nothing else.

Author @ZaksTradersCafe

However, before the month is out investors will no doubt have to absorb heaving interest rate hikes on both sides of the Atlantic. I have been against such central bank action since the 1970s, as all this does is create boom/bust. I have since been reliably informed that it is not interest rates that are the key, but control of the money supply. At a time when we are in a cost of living crisis, adding higher mortgage rates into the mix can only be described as madness.

Wildcat / Baron Oil

Looking at the small-cap space, and the FTSE Small Cap index is some 5% off its August peak. It certainly feels like it, although some of the pain has been disguised by gains in oil & gas stocks, and particularly of course gas.

That said, even here some of the best plays have been hit by profit taking, with Union Jack (UJO) and Igas (IGAS) examples of this. However, in difficult markets such as we are currently in, it is the situations which hold their ground/gain, that one can be looking to.

For instance, Prospex (PXEN) continues to climb, while Wildcat Petroleum (WCAT) rose an even 100% over the week. One presumes that the company is getting nearer to its stated intention in last month’s RNS to “secure a stake in a producing asset(s) with resources in the billions of barrels.”

Also during the week, I highlighted the possibility of a long-awaited breakout for Baron Oil (BOIL) through the 0.1p level. Here social media appears to be getting excited about the company’s potentially significant gas assets exposure. Clearly, up to 6, TCF would be pleasant for shareholders.

Tertiary

Away from oil and gas, one was able to enjoy the odd positive news story from a company where investors have certainly had to be patient. In the case of Tertiary Minerals (TYM), a tie-up with blue chip First Quantum was certainly a good look and rewarded well on Thursday. Given that the shares are still near the lows, one might imagine that any follow on news could deliver yet more gains as the company rehabilitates its credibility.

Phoenix Copper

Other standouts this week included Phoenix Copper (PXC) which continues to improve after the update on September 8. It would appear to be in drilling heaven at the moment, with the latest at the North Pit/Red Star area due to have commenced during the week.

Critical Metals

This week saw the return of Critical Metals (CRTM) after the acquisition of a 57% interest in Madini Occidental Limited, which holds an indirect 70 per cent. interest in the Molulu copper/cobalt project in the Democratic Republic of Congo. Points to note here are that the £1.8m placing was at 20p, versus 15p on Friday.

Indeed, highly experienced investors such as Ian Hannam (backed by Lloyd Pengilly), JP Morgan Cazenove, and Intrinsic Capital are in at 20p. Typically, in such post-suspension situations, investors who are weak on liquidity exit a situation whatever the merits. This should allow CEO Russell Fryer to buy the dip in order to raise his stake from 22% to 29%, as stated publicly.

In terms of the CRTM asset itself, it may be the case that investors should focus as much on cobalt as copper, as a JORC upgrading of the former could really excite the market. It is also the case that production and first cash flow is scheduled for Q4 2022, so there is no further funding requirement.

Tintra

In different sectors, it may be worth keeping an eye out for situations which are outperforming or seem to have finally bottomed. “Deep tech” play Tintra (TNT) seems set to continue its recent stellar run, rising even after the new contract and license news. A retest of January’s 370p versus 260p currently, would not seem too much to ask.

Vela

Apart from Baron Oil, another stock which seems ripe for a turnaround is Vela (VELA). At the beginning of this month, the company was keen to consider buying a division of a listed, quoted or private company as part of its investment policy focused on early-stage tech companies.

This seems to have been enough for investors to dip their toes into the stock, perhaps on the basis that this sounds like a better approach than many of the current scattergun strategies of many technology investment companies.

Author @ZaksTradersCafe

Disclaimer & Declaration of Interest
The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.


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