Weekly Small Cap and IPO Wrap: Small caps ahead this week, but end Friday lower; WA1 wins the meat tray, up 567% this week

• ASX 200 down 0.9% today, up, 0.8% this week
• The small cap index down 1.5% today, up 1.6% for the week
•  Koba and WA1 take home the meat tray

Albo from Marrickville’s money man, someone called Jim, opened up a can of fiscal whoop ass called the Government’s 2022/23 Budget.

T’were on Tuesday around dusk. On the following morn, the nation’s Q3 CPI data.

The Budget had no surprises. Moneybags Jim elected to bank all that extra commodity and energy export revenues rather than go on a UK PM-ending spree of public spending.

“This is a sensible approach given the RBA has been raising interest rates aggressively to slow demand and bring inflation down,” says CBA’s Kristina Clifton. “Fiscal and monetary policy need to be pulling in the same direction.”

Australian third quarter inflation caught most economists off-guard. That happens most of the time now.

The worse-than-expected headline and trimmed mean measures have led to a swift recalibrating of inflationary forecasts. Kritina says the CBA team for example, are going to add another 25bp hike in December.

“The risk lies with further tightening beyond this,” she says.

Global Equities

The All Ordinaries has had a decent week, up 1.8%, with all 11 sectors rising.

On Wall Street the three majors are ahead by some 1.5% ahead of Friday trade,

Nasdaq 100 futures were lower Thursday night after disappointing Amazon earnings added to the already pressured index.

Futures tied to the Nasdaq dropped 0.7%. Dow Jones Industrial Average futures fell 0.5%, and S&P 500 futures lost 0.1%.

In the EU markets are up and away – ahead by 3.7%.

It’s China that’s weighing – or perhaos Xi Jinping – with shares are down 2.5% as investors took Xi’s stranglehold at the 20th National Party Congress as a negative sign for Chinese growth prospects. From a financial and a political POV.

Global yields moved down on signs of some slowing in the pace global monetary tightening and as the new UK PM Rishi Sunak took on the job with little sign of madness, idiocy or hubris.

This calmed bond markets, with US 10-year yields now below 4% after reaching 4.2% last week, UK 10-year yields were back to 3.4% after being above 4% a week ago and Australian 10-year yields are at 3.76% from 4.2% late last week.

The Australian dollar appreciated slightly this week, up to just under 0.65 USD as the $US depreciated.

Next Week

It’s another El Nina system of central bank fun for all.

The RBA meets Tuesday to add dollars to your interest payments. Governor Lowe will speak that very night.

The Statement on Monetary Policy (SOMP) with the RBA’s full set of economic forecasts released in a glorious projectile vomit of official data on Friday.

CBA’s Head of Australian Economics Gareth Aird has outlined the bank’s economics team’s reasons behind a further 25bp hike at the November meeting but in short they see a serious (“non-trivial”) risk that the RBA hikes by 50bp following the strong inflation data.

As well as  the bank bthere are also a mass of partial economic indicators for September and October released in the week ahead.

Retail trade figures are scheduled with the nominal figures for September on Monday and the volumes for Q3 on Friday. With prices rising strongly in the quarter we forecast a flat outcome for retail volumes. Data on new lending for housing, residential approvals and dwelling prices is expected to show a further cooling in housing market activity in large part thanks to sharply rising interest rates.

ASX IPOs This Week

Conrad Asia Energy (ASX:CRD) listed on Thursday following a $45mn IPO, issuing circa 31 million CDIs at $1.46 each.
Jakarta-based, CRD is a natural gas runner focused on offshore Indonesia, with a 76.5% interest in the Duyung Production Sharing Contract (PSC) and 100%in the Offshore Mangkalihat PSC.

H&G High Conviction (ASX:HCF) and Omega Oil & Gas (ASX:OMA) listed Tuesday – one an investment company focussed on its high conviction portfolio of microcap ASX-listed companies, while the other has 2 x exploration permits for gas in the Surat Basin in south-east Queensland, as well as oil and coal seam gas prospects.

OMA successfully completed testing of its Bennett-1 and Bennett-4 oil wells which demonstrated the long-term viability of ongoing production from the field in Queensland.

Both wells were found to be in good condition and achieved peak production rates of over 30 barrels per day before stabilising at 15bpd to 20bpd – enough to warrant long-term production.

This is pretty much in line with OMA’s expectations and will enable it to focus its IPO funds on the high-value, multi-trillion cubic feet basin-centred gas play in Queensland’s Surat Basin.

The company raised $15m through its oversubscribed IPO.

ASX SMALL CAP LEADERS:

Here are the best performing ASX small cap stocks for October 24 to October 28:

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Koba Resources (ASX:KOB) has staked a project right next door to Canada’s only operating lithium mine, Tanco, which has reserves of 7.Mt at 2.76%.

That’s high grade, according to Reuben, who knows.

KOB’s 145km2 Whitlock project in Manitoba lies within the Bird River Greenstone belt which hosts several other significant lithium deposits, it says.

They include Separation Rapids (10.2Mt at 1.4%), Donner Lake (3.6Mt at 1.28%) and the historical Irgon mine (1.1Mt at 1.51%) where, despite construction of a 74m shaft and 366m of lateral development, no ore was processed.

Extensive pegmatites have already been mapped at Whitlock, with an initial field program to commence in the coming days.

KOB is a recent IPO spun out of New World Resources (ASX:NWC) to explore and develop its North American copper-cobalt assets.

It has five other projects: the Blackpine, Colson and Panther cobalt-copper projects in the Idaho Cobalt Belt; the Elkhorn cobalt project in the same belt; and the Goodsprings copper-cobalt project in Nevada.

“The addition of a lithium project to our portfolio of high-grade cobalt assets is a logical progression as we continue to focus on battery metals to support the EV revolution and the electrification of the global economy,” KOB boss Ben Vallerine says.

“The extensive pegmatites mapped at surface within our Whitlock Project are very promising.

“A geological team will be on the ground in the coming days to conduct a field program, to investigate and commence sampling outcropping pegmatites.”

After gaining 136% in early trade Thursday the $17m market cap company went into a trading halt pending a “clarifying announcement in relation to today’s announcement”.

And then of course, on Wednesday, the share price of explorer WA1 Resources ( WA1) jumped a barely believable 420%.

It’s up another 35% in early trade Thursday for a cumulative two-day gain (so far) of ~580%.

Amazing. We haven’t seen a two-day leap like this since the heady ‘stay at home and gamble on the market because COVID’ days of 2020.

Yesterday it announced the discovery a niobium-rare earths carbonatite mineralised system at the West Arunta project in WA.

Niobium is a critical mineral mainly used to make steel better, but also has growing uses in lithium-ion batteries, intelligent glass, solar panels, 5G tech, and nuclear energy.

Ferroniobium metal (65% Nb) currently sells for ~US$45,000/t.

WA1’s only drillhole into the P2 target, part of the Pachpadra prospect area, pulled up 54m at 0.62% niobium, 0.18% rare earths and 3.85% phosphorus from 162m.

The 216m-long hole ended in 2m at 1.22% Nb2O5, 0.22% TREO, and 5.73% P2O5.

Those are good numbers.

For reference, there are three major niobium mines in the world; two are very high grade (between 1% and 2.5% ore grade), while the third sits at around 0.5%.

Meanwhile, the Panda Hill niobium project, previously owned by Cradle Resources (ASX:CXX), had an ore reserve grade of 0.68%, while Globe Metals and Mining’s (ASX:GBE) advanced Kanyika project has a resource of 68Mt at a grade of 0.283%.

The fact that WA1’s hole finishes in material grading 1.22% means this thing could be getting better at depth. P2 also extends for 3km and has significant future exploration potential, WA1 says.

There are also other untested anomalies within the project area, which could now represent further targets for this style of mineralisation, Savich says.

ASX SMALL CAP LAGGARDS:

Here are the best performing ASX small cap stocks for October 24 to October 28:

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