THE SUNDAY ROAST: The ASX small caps that lit a fire under Stockhead’s experts this week
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It’s the end of a week where markets will cling to anything, especially the faint chance that the US Fed scored a hit in its battle with the inflation dragon. Over the last five days, the ASX gained 1.38%, with Emerging Markets enjoying a 3.51% vote of confidence.
At COB Thursday, Resources were up a solid 2.43%, buoyed by BHP showing its hand as a born-again M&A player, but it was $20m lithium tiddler Ragusa (ASX:RAS) setting the pace, hitting high grade lithium in the NT and enjoying a 96% share price pop.
We’re kind of obliged to start with a still-glowing Garimpeiro after his hot uranium tip DevEx last week hit the high-grade stuff at its Nabarlek Project in the NT, sending shares up +25%.
This week he’s bargain hunting gold stocks that were hit during a broad market decline that kicked in around April 21. At the time, De Grey (ASX:DEG) was trading at $1.35. It’s now around $1. Chalice (ASX:CHN) was trading at $7.25. It’s now $4.85. Rumble (ASX:RTR) was 39c, and is now 27c.
Together, they’ve made three of the best discoveries in recent years – Hemi, Julimar and Earaheedy. And they’re heading in the right direction towards price targets recently set by Macquarie in the range of 60% growth to come.
And now BHP has lit a fire under big player M&A action again, you’re looking at three large scale, long-lived and low-cost operations, going cheap.
RM Corporate Finance
While lithium makes up between 11-17% of the cathode part of a battery, virtually all of the anode part is graphite.
Anode production in China has grown from 371kt in 2020 to 1004kt this year. And unlike other battery components, graphite can’t be substituted.
If that sounds enticing, July ASX listee Sarytogan Graphite (ASX:SGA) has set up in Kazakhstan, with a Resource containing 60Mt of graphite that makes it the market’s highest grade and second largest graphite deposit owner.
First assay results will come in Q4, and you’re currently looking at a company with an ASX graphite enterprise value low of just under $40 million.
Lowest EV/second largest deposit? No real surprise SGA is up 100% on its 20c debut already.
On random resources and IPOs, State Street Corporation, Vanguard Group and BlackRock liked the look of Sierra Rutile (ASX:SRX), which listed on the ASX on July 27. Natural rutile is a high quality titanium feedstock, used in markets like pigment, aerospace and welding. And supply of it is in danger of “falling off a virtual cliff”, according to Stockhead’s Josh Chiat.
Tribeca also joined the Sierra Rutile substantial holder party last week.
From graphite and rutile to… rosin and terpene? You might know them better as essential ingredients in sticky tape, paint, disinfectants, and chewing gum.
In 2021, things were looking up for Leaf Resources (ASX:LER), with a 4,000 tpa feedstock and a processing pilot plant, and a first delivery to major chemicals company, Japan’s Yasuhara.
Then lightning struck. Literally, unfortunately resulting in an explosion and injuries – and an ASX suspension.
That lifted last month, and with nearly $10m coming back to the company through insurance and new equity funding a 16,000 tpa plant, LER is now looking at potential revenue of $68m instead of the earlier $25m target.
That’s the kind of comeback spirit we like.
This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.