Resources Top 5: Megado flies on Canadian lithium acquisition, battered coal miner looks to revive fortunes

Megado Minerals buys lithium project in popular Canadian jurisdiction of James Bay, Quebec
Allegiance Coal will pivot back to higher value metallurgical coal production
Coolabah Metals, Brockman Mining, American West Metals up on no news

Here are the biggest small cap resources winners in early trade, Friday February 17.

MEGADO MINERALS (ASX:MEG)

MEG becomes the latest in a growing list of ASX explorers to acquire a lithium project in the popular Canadian jurisdiction of James Bay, Quebec, which it says “is fast emerging as Canada’s, and perhaps one of the world’s, premier hard rock lithium districts”.

The Cyclone project is close to significant lithium discoveries at Patriot Battery Metals’ (ASX:PMT) Corvette project and Winsome Resources’ (ASX:WR1) Adina project.

There has been limited historical exploration for lithium at Cyclone, which is also prospective for massive nickel sulphides and orogenic style gold deposits.

The project is immediately adjacent to TSX-listed Sirios Resources’ Aquilon gold property, where drilling is hitting “gold grades that are among the highest ever intercepted in Quebec”, according to Sirios.

Highlights include 834.4 grams of gold per tonne over 1.71m including 3,527.4g/t over 0.40m.

MEG will jump straight into exploration once the deal completes with a view to identifying pegmatite outcrops and establishing drill targets for testing in 2023.

The $12m capped stock – which recently acquired a rare earths project in Idaho, US — surged +100% on high volumes in morning trade.

It intends to raise $2.7m via placement at 4.5c per share.

ALLEGIANCE COAL (ASX:AHQ)

The small cap US based coal miner will pivot back to metallurgical production at both operating mines due to a dramatic fall in thermal prices, and the significant recovery in metallurgical prices over the last two months.

The Platts coking coal indexes for premium hard coking coals (both east coast Australia and east coast USA) have increased to over US$300/tonne over the last two months, it says.

That’s a big premium on the US$189/t AHQ received for average thermal sales in the December quarter.

The battered stock is down 95% over the past 12 months, thanks to operational trouble at its US operations.

Many of its issues, particularly at the New Elk mine in Colorado, have been down to labour availability.

Things there appear to be improving, with seven people joining the mine in the first two weeks of February. Another 10 employees are organised to join the mine over the next two weeks from one of its sub-contracting companies.

“Production from New Elk has been improving with the average daily clean tonnes produced in the first two weeks of February showing a 7% increase compared to the average daily rate achieved in January,” AHQ says.

“The February rate is a substantial 38% increase compared to the average daily rate achieved in December 2022.”

That is also good news. Coal sales for December quarter totalled 95,500t for US$18m of revenue, compared to 187,500t for US$27.2m of revenue in the prior quarter.

AHQ suffered a A$15.4m loss in the quarter “due to the poor quantum of coal sales achieved as well as payments to creditors above the norm”.

The $15m capped stock had just $6.5m of available funding at the end of December.

COOLABAH METALS (ASX:CBH)

(Up on no news)

This gold explorer listed in June 2022 with two projects in the Lachlan Fold Belt (NSW) and one in Mount Isa (QLD).

Maiden drilling at its Gunpowder Creek project in QLD returned promising results from a couple of prospects, including 5m @ 5.70g/t Au from 108m and 4m @ 5.18g/t Au from 48m.

The company plans to carry out additional follow up drilling at Gunpowder Creek “as soon as practical to do so”, it said late January.

Meanwhile, 3000m of drilling is underway at Barrow, part of the Nymagee project in NSW.

The primary drill target at Barrow is an intense magnetic high, which CBH is reminiscent of ‘Cobar-style’ mineral deposits.

The $6m capped stock is up 70% year-to-date but remains down on its listing price of 20c per share. It had $4.2m in the bank at the end of December.

BROCKMAN MINING (ASX:BCK)

(Up on no news)

In April 2021, Chinese-owned BCK and major miner Mineral Resources (ASX:MIN) formed a JV to bring a 25 million tonnes a year Pilbara iron ore hub into production.

$11.1bn market cap MIN will fund ~$105m worth of initial development works at the ‘Marillana’ and ‘Ophthalmia’ project mine sites, as well as on the transport corridor and port area, for a 50% stake.

The development timeframe was estimated at about three-and-a-half years.

In a dry December quarter update, BCK says “the company and MinRes continued advancement of the Marillana project in accordance with the agreed Indicative Development Proposal for the project”.

Substantial field work is underway at Marillana, it says, including a program of close spaced drilling “to inform the optimum spacing for infill resource drilling which is planned to be undertaken for the areas within the early years of the mine life”.

BCK, down almost 60% over the past year, is majority owned by shipping magnate and company chairman Kwai Sze Hoi and his spouse, Cheung Wai Fung.

It had HK$17.3m ($3.2m) in the bank at the end of December.

AMERICAN WEST METALS (ASX:AW1)

(Up on no news)

AW1’s West Desert project in Utah – ~150km from Rio Tinto’s legendary Bingham Canyon mine — now has a maiden JORC resource of 33.7Mt at 3.83% zinc, 0.15% copper and 9g/t silver for 1.3Mt zinc, 49,000t copper and 10Moz silver.

There is “considerable” potential to expand this resource, the company said earlier this month. Furthermore, indium and iron ore have not been included, yet.

West Desert is recognised as the largest indium deposit in the US, while an old non-JORC resource estimated 28Mt of iron ore grading up to 68% fe (that’s high) could also be recovered.

AW1’s near term focus is expanding resources, followed by economic studies. Drilling is set to resume during Q2, 2023.

Th $8m capped stock is down 50% year-to-date. It had just $619,000 in the bank at the end of December, which means a cap raise is probably in the works.