ASX Small Caps Weekly Form Guide
The ASX… sometimes it kicks, sometimes you get kicked. Pic: Getty Images
- Stockhead’s end-of-week wrap covering small-cap movers (and occasional shake-outs) on the ASX
- The ASX benchmark and the small-caps index both had strong weeks, all things considered
- Expert analyst Hedley Widdup chimes in with three stock picks you might absolutely want to keep an eye on
The working week, ending Friday August 29, tracked like this:
ASX 200 XJR: +2.03%; ASX Small Ordinaries XSO: +3.01%
It was another strong start out the stalls on Monday morn, after Dovish Fed comments helped the ASX rip to a new intraday high. But… things faded like a pair of Levi’s in the Atacama Desert, with the day finishing disappointingly horizontal.
That flatness slouched into Tuesday as full-year reports failed to impress. Coles (ASX:COL) did its best to keep things fresh, but the ASX 200 appeared a little stale and limp come closing time.
Rounding onto the backstretch, Wednesday rallied manfully, with Gold Leader X-winging above cheering small-caps rebels. In other words, the Gold index ticked up forcefully, leading the ASX higher.
On the far turn and into the homestretch, Thursday galloped along despite large-cappers MinRes and Telix doing their best to weigh down the pack.
Friday… that gallop we mentioned just now? It turned into a weary-assed canter to the finish line after a volatile company-reporting week took its toll. While Wall Street set fresh records overnight, Friday has been a battle of wills on a stodgy local track.
Sector by sector, August’s final week varied considerably, with resources, energy and tech leading the way. Healthcare, meanwhile, looked bloodier than 11 entire seasons of Walking Dead. (Buy the dip?) All up, though, points landed with the ASX bulls with more than enough homegrown small-caps heroes carrying the week.
Tips Trifecta
This week…
Hedley Widdup, CEO of Lion Selection Group (ASX:LSX) recommends:
Price: 1.5c
MC: $31.3m
Who are they ?
Sunshine has defined gold and base metals resources of 904,000oz gold equivalent at Liontown in Queensland and a pure exploration play at Sybil. Run by Damien Keys, ex-Spectrum Metals and instrumental in the discovery of Penny West, which generated a ~30x return between discovery and takeover by Ramelius Resources.
The Upside
Sunshine is an undiscovered high grade gold story, assessing the potential for small scale gold production from 95,000oz at 4.2g/t gold. They are also starting first drilling of recently acquired Sybil, following up historic gold results including surface rock chip samples grading up to 907g/t and drill hole results including 7m at 10.6g/t. Sunshine is embarking on discovery oriented drilling mixed with assessments of potential high grade regional ore sales, which provides two pathways for excitement in the near future.
Price: 32c
MC: $198.8m
Who are they ?
Medallion owns the Ravensthorpe Gold Project in WA, which has established resources of 950,000oz at 5.2g/t gold equivalent. They have a deal to acquire the Forrestania project from IGO Limited, which includes a former nickel process plant Medallion plans to reconfigure for gold ores. Run by Paul Bennett, mining engineer and former banker, and chaired by John Fitzgerald, who also sits on the Northern Star and Turaco Gold boards.
The upside
Medallion is set for recognition as a high-grade, near term gold producer. The clever deal Medallion has done to get access to a plant closed down by IGO provides a clear development pathway, reduces permitting hurdles and dramatically reduces the funding required. At just shy of $200m market cap they are capitalised well below nearest producing peers. Solid re-rating expectation here is accompanied by a new growth possibility: the Forrestania plant also comes with a huge amount of ground and large dataset that has only been explored for nickel in the last three decades.
Price: 43c
MC: $197.8m
Who are they ?
Saturn owns Apollo Hill, a 2.24moz gold project south of Leonora in WA’s gold heartland. Managing Director Ian Bamborough has overseen the growth of this Resource from barely 500,000oz in 2017, having had a strong schooling as a gold geologist in Newmont, one of the world’s largest producers.
The Upside
Saturn has one of the largest undeveloped gold orebodies in WA, and it is two key features of the orebody that underpin an attractive potential project development. 1) It is short, fat and at surface – so this is one of the only gold orebodies around that can be “bulk mined”: that makes for large ore volumes, and low unit costs. And 2) when it is crushed it sheds gold into a cyanide solution beautifully in a heap leach – this is a process pathway unusual in Western Australia but responsible for ~40% of global gold produced each year, and is also low unit cost.
In the Money
Omega Oil & Gas (ASX:OMA)
Who says energy investing is dead?
For years consigned to private interests free from ESG pressure, new oil and gas exploration continues to survive in the forgotten corners of the ASX.
And ASX microcap Omega’s tale is a doozy. It’s chasing big oil and gas discoveries in the Taroom Trough, one of the big hopes for unconventional gas discoveries to save the east coast’s teetering energy market.
Shell has reportedly already flared some gas nearby, and now $135m capped Omega, backed by PE giant Tri-Star and coal mogul Brian Flannery, is on the up after confirming the commercial potential of its Canyon Sandstone in modelling.
OMA shares are up 17% on the week but 86% over a 12 month horizon.
Kaili Resources (ASX:KLR)
What to make of the ASX’s newest meme stock.
There’s plenty of speculation circulating online on what on earth is behind the sudden rise of the rare earths explorer, which until recently was majority owned by a Chinese coal company.
After another pop on Monday, the mysterious rare earths explorer can’t seem to explain the sudden movement in its shares, the control of which appears to have slipped well beyond the powers of the ASX.
This week’s movements have been far more muted that last Monday’s race to $3.18, at one point a 9000% single day gain.
Kaili had little homework to show, save for announcing around 1000m of shallow rare earth drilling in the Murray Basin near Australian Rare Earths’ Koppamurra project.
One for the day traders, but we aren’t holding our breath.
Invictus Energy (ASX:IVZ)
Energy security continues to be an emerging theme, and it’s extremely pronounced in the poor global south, where natural resource wealth can be highly influential.
A potential game changer for Invictus in its hopes to develop the Mukuyu field in northern Zimbabwe this week, signing a deal with Qatar’s Al Mansour Holdings to take a 19.9% equity stake at a premium.
That could also see the Qatar royal family tip US$500m in finance to bring the Cabora Bassa gas project – once looked at by Mobil – to commercial production, with a JV between Invictus and Al Mansour called Al Mansour Oil and Gas to become a Qatari beachhead into southern Africa’s energy scene.
It’s part of a wave of investments Al Mansour has completed in recent days, pledging US$32bn of injections into Botswana and Mozambique also in the past week focuses on resources and agriculture.
Hot Stock of the Week
Ark Mines (ASX:AHK)
Ark Mines’ rise on the ASX this past week has been nothing short of meteoric, at one point climbing more than 180% over 24 hours of trading to achieve 50c per share before the stock simmered down to the low 40s.
What triggered this mini bull run? None other than a huge show of faith from the Queensland Government towards the company’s Sandy Mitchell rare earths project northwest of Cairns.
Queensland’s QIC Critical Minerals and Battery Technology Fund has poured $4.5 million into the project with the objective of supporting the state’s critical minerals supply chain.
Sandy Mitchell currently hosts a resource estimate of 71.8Mt at 1,732.7ppm monazite equivalent. At the time of writing, AHK management was confident of a near-term resource upgrade as resource expansion drilling was running ahead of schedule. The company is drilling 2,500m over a total of 189 holes.
In simple terms, monazite ore is a host rock of various rare-earth elements – the lifeblood of magnets, batteries, defence applications, electronics, renewable energy infrastructure and more.
AHK managing director Ben Emery said the investment from the Queensland Government showed the state was serious about being a major player in the global critical minerals supply chain.
“[It delivers a] long-term alignment with the State Government’s policy objective to position the North Queensland region as a key supplier of the critical minerals used in global clean energy supply chains,” Emery said this week.
At Stockhead we tell it like it is. While Medallion Metals and Ark Mines 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.
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