Big interest in speciality metals – but only a few players will come through
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Stockmarket investing advice and tips from Mathew Walker, chairman of boutique corporate advisory Cicero Group and co-founder of technology fund Alchemy Venture Capital.
What is on the horizon for the tech sector?
We’ve seen so many ideas come through that have been hailed as the next eBay, Uber or Google but essentially everyone is just on the hunt for the next unicorn.
Without a venture capital market in Australia, a lot of these companies have no choice but to go to the ASX to raise capital. Often they are in their infancy and wouldn’t usually get to market if they were in the US or the UK where there is a deep venture capital market.
Companies like Freelancer (ASX:FLN) and Sky and Space Global (ASX:SAS) have gone up and stayed up, but there have been some spectacular failures like Ziptel (ASX:ZIP).
In technology terms, performance equals revenue — if you can substantiate your blue sky with revenue then you will be rewarded.
What is your outlook for the resources sector?
The interest at the moment is really in speciality metals, not bulk commodities or precious metals especially anything that is needed in the manufacture of a Tesla i.e. lithium, cobalt or graphite.
We know we have several dozen lithium explorers and emerging producers at the moment but investors are looking out for drill holes now more than anything else in the market.
A lot of the companies are of such a magnitude that could supply the world, but the key will be in the grade of the speciality metals. Those that can produce at the lowest end of the cost curve are the only ones that will survive.
Speciality metals is becoming a crowded space but there will only be a small number of players that come through and become successful if history is any guide.
Past that rational exuberance phase, people now need to see you drill, and a robust drill hole at that. If you can deliver that you will continue to be rewarded but anything short of that simply won’t cut it.
Which shows more promise in the current market, tech or resources?
Sentiment towards both of these sectors is neutral — neither favourable or unfavourable.
Each of them are positioned in the mature phase. We have gone through that blue sky phase of irrational exuberance into what I like to think of as “the morning after”, where you wake up, scratch your head and ask yourself what you’ve done.
In this phase the key is education and there is no better way to educate yourself than by losing money.
What ASX-listed companies are on your radar?
My best advice is there is no substitution for your own education, you really do need to know the fundamentals and block out the opinions of the sheep that you hear so often on online forums and on social media.
Yojee (ASX:YOJ) has been a success story over the past 12 months and has made the transition from its development phase to product launch and first revenues. They appear to be quite robust and have a unique positioning as the “Uber of logistics” with little or no competition through south-east Asia.
Comet Resources (ASX:CRL) are chasing a graphine deposit in south-western WA. Their last raising was at 2c and now they are trading at 6c but the key will be in the metallurgy and if the graphite lends itself to graphine production. For those with an appetite for risk, it can offer multiple rewards.
Mathew Walker is a businessman and entrepreneur with extensive experience in the management of public and private companies, corporate governance and in the provision of corporate advice.
In a management career spanning three decades, Mr Walker has served as executive Chairman or Managing Director for public companies with operations in North America, South America, Africa, Eastern Europe, Australia and Asia.
He is co-founder of technology fund Alchemy Venture Capital and Chairman of beef cattle enterprise the Stone Axe Pastoral Company. He also serves as a Director of ASX listed financial planning service provider Intiger Asset Management Limited (ASX:IAM), mineral exploration company Corizon Limited (ASX:CIZ), and as Chairman of disruptive logistics platform Yojee Limited (ASX:YOJ).
This advice has been prepared without taking into account your objectives, financial situation or needs. You should, therefore, consider the appropriateness of the advice, in light of your own objectives, financial situation or needs, before acting on the advice.
If this advice relates to the acquisition, or possible acquisition, of a particular financial product, the recipient should obtain a Product Disclosure Statement (PDS) relating to the product and consider the PDS before making any decision about whether to acquire the product.