The Waiting Game
This week’s mention of the mainstream media is actually a positive one. It is the IC Editor email I received on Saturday from Deputy Editor, Dan Jones. He points out that we are playing a waiting game as far as the Government’s initiative to boost the stock market. Apparently, this has already been delayed from the spring, when the AIM index was 840. It is now under 700. But what are we actually thinking that Chancellor Jeremy Hunt is actually going to do?
Abolishing stamp duty would be a start. This has actually been mooted since the 1990s. I would venture to suggest that this will not happen in our lifetimes, something I say to tempt fate if nothing else. On this basis nor will the abolition of the TV license or Inheritance tax. Nor will the simplification / reorganization of the tax system, welfare or the beloved NHS. Instead, the name of the waiting game is kicking the can down the road, and progressively adding to the tax burden to fund an increasingly inefficient state.
Q Global Commodities
One of the issues of the current politics of envy of which taxing billionaires is a key part, is that it underlines how present economic policies mean we are rapidly running out of other people’s money. This is quite important given that it is entrepreneurs who make the world, or at least the economy go round. A key question in a high tax / red tape environment, is why should entrepreneurs bother to create wealth at all? The answer for me was delivered in an interview this week with Quinton van der Burgh, founder and CEO of Q Global Commodities. This is a company that has acquired and co-developed over $60bn in critical mineral reserves. Quinton is someone who was firstly an entrepreneur in telecoms, and then in the mining sector. I would commend the interview to anyone who is interested in how some people become successful in business, while most do not. The rationale behind van der Burgh’s investments in Marula (AQSE: MARU) and Shuka (SKA) is also explained. Not surprisingly, shares of Marula were up 33% in the wake of the interview being published on Friday morning. I would say that the interview was the best out of the hundreds I have conducted in terms of not only the interviewee, but also the investment argument it told us.
The biggest riser of the week in the small cap space was Quantum Blockchain (QBT). Here the company, where the clue is in the name, said on Friday that its proprietary Method A and Method B software are “available as a SaaS client-server cloud application by uploading an upgrade to the mining rigs’ firmware.” The sizzle here and the trigger for the share price rise was that the implication is that QBT regards the source code of its Methods as too valuable to be shared with third parties. Therefore, it is only to be available on a SaaS platform.
There was a follow up interview with Greg Martyr, Executive Chairman, Capital Metals (CMET). The shares tripled in the aftermath of the company announcing the expulsion of a key Sri Lankan Minister earlier in the month. This week we discussed how the mineral sands company has received a favourable decision from the statutory appeal hearing against the notice of cancellation of Industrial Mining Licences 16236 and 16237 which was issued in May 2023 by the Geological Survey and Mines Bureau. While the shares are now up to 4p, they were double this before the licenses debacle began, and as high as 20p last year.
It is customary for most in the market to blow their trumpet regarding their winning calls / trades, and keep quiet about the duds. All the while they deliver the usual patronising / holier than though attitude, as if they know better and are all ultra rich. Anyone who actually knows what the market is really like, knows that humility is the only mindset that really wins consistently. A chart that stood out during the week was that of Phoenix Copper (PXC). This was called up at the start of the week off the back of bullish RSI divergence, and a strong hammer candle from below 16p. The shares peaked at 23p, and it will be interesting to see whether the next week or two delivers long awaited positive funding news for the company?
Last Saturday’s Bulletin Board Heroes video covered the chart of OnTheMarket (OTMP). This was near the 60p level, as the shares had delivered what I term a sideways shuffle, (consolidation) above a rising 50 day moving average. The rather punchy call then was that the shares could hit the top of a rising trend channel on the daily chart since February: this meant above the 60p zone OTMP might hit the upper 80p’s zone by the end of next month. Well, I should have said by the end of the week. It also turned out that towards 90p was actually too conservative. The company went for a takeover from CoStar, with the shares closing at 107p on Friday. What was pleasing here, apart from getting it right, was that I have hardly ever looked at OTMP, it was just a chart that stood out on the screen. A second point is that if the stock stood out from a charting perspective it kind of means that there was a significant amount of buying interest in the stock ahead of the bid announcement, despite the fact we are in the grips of a liquidity slump. A final point is that given how low the London stock market valuation is currently, there should really be a bid a day for UK companies.
The return of Eco Buildings (ECOB), the former Fox Marble famed for its €195m Kosovo Government litigation, reminds us of the slings and arrows of the junior end of the stock market, and AIM in particular. The company has grappled with the cost of the RTO, and all the other red tape / bureaucracy of being listed, as well as the shares being suspended due to the delay in publishing its 2022 results. There really has to be a better, less costly, more efficient way for small companies to be on the public markets, where so often such issues arise through no fault of their own. At least with ECOB back from suspension we can look forward to the modular housing company getting on with business after it announced it has completed a comprehensive refurbishment and upgrade programme of all essential machinery required to produce its wall panels. The company said it is ready to deliver on its order book, beginning with its first 2 contracts valued at €114m in revenue spread over the next 3 years. ECOB’s current market cap is only £13m.
Finally, it is perhaps worth mentioning Panthera (PAT), given that like Fox Marble it is a massive litigation win play. Arguably, of all the big litigation plays around such as GreenX (GRX) £737m from Poland, and Ascent (AST), looking for €657m from Slovenia, PAT is the potentially the largest. It is also favoured as in August it said LCM Funding SG has completed the due diligence and issued the funding confirmation notice for $13.6 million of funding for Panthera’s subsidiary Indo Gold Pty Ltd. Given LCM’s very impressive litigation track record, those who are in PAT shares at 6p are likely to be sitting comfortably: not only in the stock near the low end of the trading range, but also being able to look forward to a litigation result which would deliver many multiples on the upside.