Although the FTSE 100 had a quiet week, as investors fret over inflation and growth, the small cap space seemed refreshingly busy. As far as the current inflation / growth / house prices conundrum, one can say that with the cost of living crisis, and a hockey stick interest rate situation for homeowners, for the UK to manage 0.1% GDP for Q1 2023 is something of a miracle.
This is especially so when you factor in 1970s style taxation levels, work from home / 4 day weeks / strikes et al. While we have the mortgage time bomb still to pan out, for the economy to be anywhere near breakeven, shows resilience. This is even though March’s 0.3% dip could be the start of the rot. The Government will almost inevitably have to reduce the tax burden, and it would help if the Bank of England stopped raising interest rates to undermine the Government…
Golden Metal Resources
In the world of small caps a couple of IPOs featured this week, the first was Golden Metal Resources (GMET), where I interviewed CEO Oliver Friesen. He pointed out the kicker with the company is that within its Pilot Mountain Project in Nevada, it is sitting on the only primary production source of Tungsten. Given the belated realisation throughout the world that relying on China for key industrial / manufacturing commodities is and has been a mistake, this puts GMET right in the box seat in the States, where the Government has deep pockets to secure its own sources critical metals and Rare Earths, the latter of which China is also reportedly banning the export of.
I also interviewed another recent IPO during the week, in the form of Fulcrum Metals (FMET) and its CEO Ryan Mee. This is another company where I, as someone who probably interviews more CEOs than anyone else, can just feel the commitment and drive of the interviewee. Here Mee discusses the latest news that FMET is moving forward with plans to drill at the Schreiber – Hemlo project this year. The phase two mapping and sampling program at Big Bear will commence later this month.
While one could say that both GMET and FMET are companies that have received decent engagement and interest of late amongst investors, the challenge for many companies is to gain that market appreciation in times when many are somewhat fussy to say the least. For instance, the announcement this week that ASX listed Riversgold will farm-in ORCP’s Northern Zone Gold Project, in Western Australia. While the market may not have appreciated this news to date, it does prove the companies project identifier and developer model. In this case, to buy a project for a limited amount of cash, and then find a third party to bankroll it and then share the proceeds. We can look forward to a similar future pattern, especially with the much larger energy projects Oracle has in Pakistan.
I started off the interview with Alex Brooks, Independent Non Executive Director at Graft Polymer (GPL), with the rather obvious question, “What actually is a Polymer?” The answer was duly provided, along with a rundown of the scope, and perhaps most importantly, the scalability of the business. As seasoned investors will be aware, the greatest positive value inflection can come from companies who are off the radar getting appreciation and understanding.
Finally, there is nothing like the face to face meeting, even in a day of fibre broadband and zooms. In this case, I ventured out to a presentation given by Cobra Resources (COBR). This came in the wake of the gold, rare earth and IOCG exploration company focused on the Wudinna Project in South Australia, announcing further gold results from a recent 20-hole, 2,466m Reverse Circulation drilling programme aimed at expanding the COBR’s existing gold and rare earth resources. To my mind, the China supply crackdown already enhances the value of COBR, but it was good to hear what is going on from the horse’s mouth, in this case CEO Rupert Verco. One would expect the company to accelerate its plans over the course of the rest of 2023, especially given the increasingly favourable fundamental backdrop.
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