Truss One Year On
There has been plenty of talk given that we are a year on from the ill-fated Truss Premiership. Given that we have been told the alleged machinations of Johnson / Sunak, I would maintain that the main downfall of Truss was that she got in the way of Sunak being PM. All the talk of unfunded tax cuts is for me completely bogus, especially as we highly likely to have them ahead of the General Election. The only way to boost growth is to lower taxes, whether funded or unfunded. A year on we have sky high taxes, painfully high mortgage rates, it is impossible that there will be any growth. This is totally separate to whether billions are being thrown at the NHS / Welfare. Even worse, there is little incentive for anyone to be entrepreneurial, especially with the political uncertainty of having a new government which could tax people even more.
St Leger Day
Well, it looks as though there actually was a St Leger rebound for the UK market, as all the elites / rich came back from their summer playgrounds. There were also glimmers of hope for the small cap space, as companies like Beacon Energy (BCE) managed to deliver an oversubscribed £4.3m fund raise. I supposed any fund raise would be better than the Amte Power (AMTE) raise of £2m at 1.7p versus the prevailing 9.2p share price. This must turn out to have been the bottom of the market for the minnows.
Rather interestingly, I was asked a couple of weeks ago about mining companies, from someone who wish to invest in minnows who are producing. What was a standout here is that I was reminded as far as the London stock market how few mining companies are producers, rather than just explorers. Intriguingly, and perhaps rather tellingly, looking around this sector, there are many non producers who are far more favoured, if only in terms of sentiment / rating. The conundrum is being played out currently at Hummingbird, where there was a near tripling of the share price in the run up to first pour ahead of the summer. But since then, the “better to travel rather than arrive”, adage looks to come into force. It could be argued that at current levels, approximately half the peak of the early summer, those who are in the market for a producing and growing multi- asset, multi-jurisdiction company have their target.
A company which pleased the market this week was Cadence Minerals, as it announced a licensing and construction timeline for its flagship Amapa project. The sizzle here is that the timeline has been accelerated quite markedly in terms of the iron ore mine. Indeed, a jump in time from up to 3 years to 12-16 months is significant, especially given the notoriously impatient nature of retail investors. We have already seen a decent jump for KDNC over the past, nearly a fifth. One would consider that delivering such a pleasant surprise to the market will continue to benefit the shares, given the way that they were trading at 17p at the start of this year, versus 8.25p now, before the timeline shortening announcement.
Given that we have been treated to at least an 18 months bear market in the small caps space to date, it is very easy for investors to suggest that the system is broken. Well, in some what it is, courtesy of the regulators, with all the cost, red tape, and goalpost moving of recent years. However, there are actually still plenty of companies that can withstand the table being tilted against them. This week we were treated to strong updates from hVIVO / Poolbeg, with even mainstream media coverage thrown in. Indeed, as a company you really know you have made it when journos deem your company good enough to be in the papers. As far as hVIVO was concerned, it was not surprising that the repeated contract wins delivered EBITDA growth of 129%. Of course, the stock market being the stock market, shares of HVO are still well down on the 23p peak at the beginning of this year. But one would suspect that the company has done more than enough for a significant re-rate, even in current reticent conditions.
For Poolbeg, the progress made would be impressive on its own, even without the AI angle, which seems set to transform its space of biopharmaceuticals. The AI treatment via POLB’s Cytoreason allows research to be accelerated in a way that could not be imagined even a few years ago. With a large cash pile and momentum gathering as far as POLB 001 is concerned on the influenza / inflammatory conditions front, and the prospect of developments in oncology beyond CAR T, Poolbeg is certainly on the front foot.
One of the things that I have enjoyed in recent years, since I began interviewing CEOs is how much insight you can get from speaking to management directly. Empire Metals is a case in point. The first time I spoke to Shaun Bunn, Managing Director, I thought that this was a man who looked to be the man for the job, i.e. this was a company going places. Alas, this is not a feeling that happens very often. In fact, I may produce a list of management that passes the interview / investor relations test as a one off special. Getting back to Mr Bunn, and without wanting to embarrass him any further, EEE delivered the starting gun on its flagship Pitfield Project in Western Australia, where we should get the big reveal as far as the scale of this giant, titanium-enriched mineral system in coming weeks. The first rally for the shares went from 1.5p this summer to 5.5p. The chances are that the next will be from 4p to 8p as a measured move charting view.
Golden Metal Resources
One of the up and coming CEOs from a relatively newly listed company is Oliver Friesen at GMET. Given that he is well out of the Generation X demographic of most of the current management, we have someone who is fresh faced, and I would say looking at the challenge of getting eyeballs on his company from the perspective of someone who is totally au fait with social media and the latest PR / IR techniques. The sizzle with his company remains with the strategic value to the USA of his Pilot Mountain tungsten asset. One would expect significant moves by the government there in coming months, and just to prove that the company is firing on multiple cylinders, it announced the identification of a significant 10km2 conductive zone at its Kibby Basin lithium project in Nevada, USA.
A company which continues to be something of an enigma is Reabold Resources. One can safely say that sentiment towards the company is not exactly at a high, and it would appear that whatever the price of oil / gas does, has no positive influence on the stock. Nor does the company’s ongoing strategy. This week RBD moved to increase its interest in LNEnergy Limited by a further 1.6%, funded from existing cash resources and taking it up to owning approximately 17.6% of LNEnergy’s enlarged share capital. I see the first signs of a technical turnaround, bullish RSI divergence on the chart of Reabold this week. But it remains to see whether the stock can finally escape the shackles of what has been a mysteriously brutal bear run.
Finally, to go with the back to school vibe this week for the stock market – obviously this was about a week later than the real world, I ventured out to attend company presentations. In Shoreditch it was Blackbird (BIRD) who delivered insight into their new cloud video editing platform, elevate.io. Normally, new tech rather passes me by, but as I actually use video editing for the Bulletin Board Heroes and interviews, this was right up my alley. I cannot wait to get hold of this new product later in the year.
Hydrogen Future Industries / Cobra Resources
Also not WFH was an event in the West End with Hydrogen Future Industries (HFI) and Cobra Resources (COBR). I have followed both companies for quite some time, and it would appear that for HFI this month’s announcement of the completion, construction and installation of its latest, upgraded 1 metre diameter wind turbine prototype in Montana, USA, is a breakthrough. The market has totally missed how stand alone wind turbine units generating hydrogen off grid could be transformational to domestic and industrial use. As for Cobra, it revealed Rare Earth Elements mineralisation at the Boland palaeo-channel prospect to be cost-efficient, easily recoverable ionic adsorption rare earth clays.
First Class Metals / Fulcrum Metals / Panther Metals
As far as the agenda for this coming week is concerned, it will be a post-pandemic return to the Côte Brasserie St. Paul’s. The occasion, apart from meeting up with fellow middle-aged small-cap fans, will be to see and hear Ryan Mee, Marc Sale and Darren Hazlewood, present (without death by Powerpoint) regarding FMET, FCM and PALM respectively. The proceedings start at 6.30 pm on Tuesday, 19th September.
Disclaimer & Declaration of Interest:
The information, investment views, and recommendations in this Zaks Traders Cafe interview are provided for general information purposes only. Nothing in this interview should be construed as a promotion or solicitation to buy or sell any financial product relating to any companies under discussion or referred to or to engage in or refrain from doing so or engage in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the commentator but no responsibility is accepted for actions based on such opinions or comments. The commentators may or may not hold investments in the companies under discussion.
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