04/06/2023

One of the best phrases in the English language, and one that keeps delivering new examples of itself is: hoist by your own petard. Without going into the detail: Whatsapp messages, the Covid inquiry, eat out to help out, tax cuts, they are all in the mix this week. For the stock market, a Moneyweek article underlined how the Blair Government in particular sowed the seeds for the Gobi Desert like liquidity issues the UK stock market now has, exacerbated by the Orwellian / Kafkaesque regulation: meaning that the UK has gone from being over 10% of the world stock market to under 4%. Well done to all concerned who achieved this: your contempt for entrepreneurial spirit and people striving for success to have a better life has paid off.

$13bn Short

Speaking of entrepreneurial spirit, of a kind. We read this week that $13bn has been lost by traders going short of Artificial Intelligence stocks, such as Nvidia (NVDA). Obviously, one has to sympathize with those who have lost money, perhaps just as much as the bears laugh at long term investors when they lose money. But this $13bn statistic does remind us that the liquidity of the bears is crucial for the stock market. It also causes rallies / recoveries to be rather larger than they would have been if a squeeze had not occurred. For instance, one would imagine if the bears had not been caught out in Chill Brands (CHLL), the stock might have only rallied from say 2p to 4p, not 2p to 14p. Same with Versarien (VRS), those who have been calling the stock a zero (they always like to terrify and exaggerate), find themselves on the wrong side of a rally from 1p to 3p. Hopefully, there will be much more, however this situation resolves, good or bad.

Fox Marble / Hemogenyx / Capital Metals

As far as the general small cap space was concerned, while the market as a whole rebounded on the US debt ceiling issue being fixed, there were some chunky falls of 25% and more during the week in the small cap space. Fox Marble’s (FOX) admission to AIM was not a party, while Hemogenyx (HEMO) has to get back to the FDA regarding Hemo-Car-T.  If it does this successfully, the latest dip may be short lived.  The same may be said for Capital Metals (CMET), also had a run in with its particular umpire, in this case in Sri Lanka regarding its mining licences.

Fundraising

There were a lot of small caps raising money before everyone checks out for the summer holidays, or at least those who work in the City.  Kefi (KEFI), Empyrean (EME) and Silver Bullet (SBDS), were all standing outside their cash machines, pin number at the ready. These three stocks fell by a quarter or more. But showing them how to raise cash properly was Rockfire Resources (ROCK). Here there was a £880,000 subscription at 0.22p, with the shares rallying to 0.33p by the end of the week: ROCK is now funded for the resource upgrade drilling, and an updated JORC resource estimate.

Empire Metals

Shares of Empire Metals (EEE) were not surprisingly on the front foot, rallying 30% on the week. However, this still left them below where they were in February before the announcement of a giant titanium and copper discovery at the start of the week. Sometimes one wonders what a small cap has to do get a big lasting rally?

Edenville / Shuka Resources

The answer may be to bring on someone with a bit of oomph to the board. In the case of thermal coal play Edenville (EDL), as well as the name change to something a little more geographically appropriate, we saw the arrival of the CEO of Marula (MARU) as director. He has delivered a multi-bagger winner at MARU, and the market will be hoping that some of this success will rub off the newly christened Shuka Resources (SKA). The latest £1.5m raised will be used to fund new projects in Africa.

Zenith Energy

Finally, there were a couple of companies changing tack this week, or as the trendy vernacular goes, pivoting. First was Zenith (ZEN), which has decided to focus on revenue generating projects in the USA to compliment the development projects it has in the Middle East and Africa. The idea here is that there will be a growing contribution from North America, while it waits on licenses it has in more exotic locations to mature. This means that shareholders can now sit out what can often high reward / high bureaucratic situations, safe in the knowledge that cash will be coming into the coffers.

Thor Explorations

There was also an inspired pivot at Thor Explorations (THX). Here the West Africa focused gold producer is already going great guns, with pretax profit up 23% to 4.3m. The rub though, is the acquisition of a significant lithium asset in THX’s home turf of Nigeria, a country previously not on the map as far as this metal is concerned. Even better is the stated intention by the company to develop lithium in Nigeria without dilution.