ASX Small Caps Form Guide

• It was a week of two halves for the ASX benchmark… and the small-caps index 
• Expert Nero Resource Fund analysts chime in with their three stock picks 
• And this week’s Stockhead ‘Hot Stock’? Find out further below

Stockhead’s end-of-week wrap covering small-cap ASX movers, news of note and expert recommendations.  

The working week, ending Friday September 5, 2005, tracked like this:

ASX 200 XJR: -1.21%; ASX Small Ordinaries XSO: +1.50%

The Call to the Post sounded and the ASX runners were pumped on Monday… only to face plant right out the gates. It was a shaky Wall Street’s fault, partly. The tech sector weighed heavily, but at least gold surged.

Rinse and repeat for Tuesday. Gold and gold stocks set the pace for the outliers, while several big caps stumbled in a sluggish pack.

Rounding onto the backstretch of Wednesday and not even the gold safe haven narrative could lift spirits. A soggy track saw companies in all sectors plod through the worst ASX trading day (-1.82%) since Trump’s Liberation Day shenanigans. If we’d had the stones to buy the dip, though, future us would be high-fiving… because…

… on the far turn and into the homestretch, Thursday was a cracker. Tech stocks found their mojo and the banks did a fair amount of heavy lifting, too. We won’t pat them on the back too hard, though – they caused most of the rout the day before.

Friday… a solid effort that, with a 0.49% daily gain for the ASX 200. The damage was done early in the weekly race for the bourse benchmark, but the small caps-index came flying home to take the honours, keeping bolder punters in the green.

Tips Trifecta

This week…

Nero Resource Fund’s Rusty Delroy and Daniel Harangozo recommend:

Stellar Resources (ASX:SRZ)

Price: 2.1c

MC: $41m

Who are they?

Stellar owns one of the highest-grade undeveloped tin assets globally located in Tasmania, ~15km from Australia’s largest tin mine in Renison. The success of recent drilling (strongly mineralised zone at depth at Severn announced last week) should support an upgrade in the scale and confidence of the underlying resource at Heemskirk, with an existing MRE of 7.5Mt at 1.04% Sn. There is increasingly strong evidence of a deep and rich tin system which could expand over time – Renison started with a 4Mt reserve in 1968 and is still being mined today.

The upside

Project economics are poised for significant growth via resource expansion, increased mining rates and process flow optimisations, including the addition of ore sorting. This should see SRZ produce ~3000-3500tpa of tin, which is around ~1% of global supply. An MoU was recently signed over the 900,000tpa Avebury process plant, which is ~10km from Heemskirk and currently on care and maintenance, which grants SRZ a six-month period to evaluate the Avebury plant and mine infrastructure as a potential processing facility for its tin feedstock.

Black Canyon (ASX:BCA)

Price: 48c

MC: $64m

Who are they?

Located only 80km south of ConsMin’s Woodie Woodie manganese mine and about 120km east of Hancock’s Roy Hill iron ore mine, Black Canyon has made a shallow, high-grade (+30% Mn), strata bound manganese discovery with consistent thickness and grade over 2-3km strike extent. It’s still open and has further upside potential with a shallow iron ore discovery. Board and management is strongly aligned, with 9% ownership.

The upside

Exceptional return on investment per exploration hole given shallow depth, grade and swiftness of execution – Phase 3 drilling to commence comprising ~150 holes for 3500m and expected to take 3 weeks to complete. Potential for a high-grade, low strip, simple processing manganese operation supporting strong economics at spot pricing; upside from potential DSO iron ore.

Emperor Energy (ASX:EMP)

Price: 3.6c

MC: $26m

Who are they?

EMP controls the Judith gas field in the Gippsland basin of Victoria next to the Woodside/ExxonMobil Kipper field. Prospect partially de-risked by Judith-1 discovery well drilled in 1989 by Shell. Modern 3D seismic and reinterpretation of petrophysics supports the drilling of the Judith-2 well. Independent validation of major gas resource by GaffneyCline.

The upside

GaffneyCline estimated a 2C Contingent Resource of 166 Bcf with the Judith East Block that contains the Judith-1 gas discovery well, and a P50 Prospective Gas Resource of 142 Bcf within the Longtom Gas Sands. The total Unrisked Prospective Resources audited by GaffneyCline across the Judith Gas Field are 1.86Tcf. Proximal to infrastructure. Close to existing pipeline, 14km from the Tuna Platform owned by Woodside, and 40km from the onshore Orbost Gas Plant owned by Amplitude, with an MoU with Amplitude in place. EMP holds 100% of the reservation and will commence a formal process to explore a farm out or other strategic partnership shortly. Attractive east coast gas commodity thematic due to declining production and severe underinvestment in new supply over an extended period.

In the Money

4D Medical (ASX:4DX)

Now worth $607m, 4DMedical’s rise has been staggering in the past week, showing ASX gains can extend beyond small cap explorers and buy now, pay later usurers.

Backed by finance from $31bn health giant Pro Medicus, 4DX is flying, up 175% over the week, after securing US FDA approval for its ventilation perfusion device CT:VQ.

It’s a scan piggybacking off CT imagery that shows airflow and bloodflow in the lungs without the use of a contrast agent.

VQ scans are mainly used to find potentially deadly blood clots, but CT:VQ can also shine a light on asthma and chronic obstructive pulmonary disorder, among other things.

4DX is aiming high. It sets the initial addressable market at US$1.1bn, with a global opportunity of US$2.6bn and says it expects to displace 100% of nuclear VQ scans over time.

You can keep tabs on all the ASX medical breakthroughs before they hit the 6pm news at Tim Boreham’s wonderful Health Check column.

Pearl Gull Iron (ASX:PLG)

Pearl Gull will finally cut its losses, four years on from a terribly timed $4m IPO which coincided with iron ore’s first dip below US$100/t after its 2021 boom and bust.

It never quite had the capital to work up a resource for the highest grade portions of its Cockatoo Island iron ore project, one of the first mined by BHP in 1951 long before the Pilbara became the engine room that turned it into the world’s biggest mining company.

Located off the Kimberley coast and considered analogous to the nearby Koolan Island, one of the few 65% Fe hematite iron ore operations in the world (most Pilbara product now runs at 61% Fe), PLG will bank $4.5m in instalments from the sale.

It will be traded to a group of companies associated with Crestlink, a firm aiming to establish a +$100m supply base for offshore oil and gas operations on the island.

All eyes now on how that money will be spent, after PLG dumped a farm-in to a Chilean rare earths project last year.

Future Battery Minerals (ASX:FBM)

The secret of WA’s nickel and lithium projects is they tend to be prospective for gold as well.

With prices of the latter two in the toilet and gold at all time highs, it’s no surprise that explorers are looking in their own backyards to see if they’ve overlooked some precious metals potential.

So it is with Future Battery Minerals at its Miriam project near Coolgardie, a famous gold rush town in WA’s Eastern Goldfields.

The first 10 holes from a 21-hole RC program have struck economic grade gold in shallow oxidised areas at the Forrest prospect, with a thick, juicy highlight hit of 33m at 1.57g/t Au from 35m in FGRC004.

That included a higher grade section of 16m at 3.1g/t Au from 44m downhole. Another standout infill result included 29m at 1.45g/t Au from 32m.

Dipping further into fresh rock, drilling struck 12m at 1.56g/t Au from 75m and 4m at 1.37g/t Au from 108m.

FBM has plenty of cash to bankroll follow-up drilling, with $6.4m in the bank, and results from another 11 holes at the Canyon prospect to Forrest’s south are due in the next fortnight – a previously untested 1.75km-long structural target.

“FBM’s primary goal is to swiftly and methodically build on these Phase 1 results, which will inform future exploration drilling at Miriam,” FBM MD Nick Rathjen said.

“Once all phase one assays are received, the team will be preparing to commence the second phase, targeting further extensions at Forrest, along with regional targets including Canyon, Jungle and Forrest South.”

Hot Stock of the Week

Bayan Mining and Minerals (ASX:BMM)

It’s been a busy stretch for Bayan Mining and Minerals, with the stock climbing  ~150% over the past month.

The company has built strong momentum off the back of standout exploration results and a string of corporate moves that have caught the market’s attention.

Exploration momentum is building quickly. In less than two months since securing the Desert Star claims, Bayan has already delivered “outstanding” REE grades from  reconnaissance sampling, including up to 26,286 ppm TREO (2.63%) in heavy mineral concentrates and 7,841 ppm TREO (0.78%) in rock chips.

A follow-up geophysical desktop study has now pinpointed priority target areas, giving the company a clear roadmap toward drilling and sharpening the focus on the project’s most prospective zones.

Strategically located just kilometres from Mountain Pass, one of the world’s largest rare earth operations, Desert Star offers compelling appeal in a market where supply security is front of mind.

To back the push, Bayan has appointed a former senior US official as strategic adviser and raised $3.27m to fast-track exploration.

Investors will be watching closely as drilling plans take shape.

At Stockhead we tell it like it is. While Bayan Mining and Minerals and Future Battery Minerals are Stockhead advertisers, they did not sponsor this article. 

The views, information, or opinions expressed from any interviews in this article are solely those of the interviewee and do not represent the views of Stockhead.

Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.