Echoes Of 2008
Another week of banking sector turmoil, and of course, with echoes of 2008. At that time the situation was saved via fellow banks, the taxpayer, and central banks lowering interest rates to zero. The problem with the strategy is that banks that should have been allowed to go under as they were not viable businesses, only survived because we were in a QE / zero rates environment. As soon as central banks in the current cycle’s rate hikes kicked in weaker banks, and soon consumers, who can barely wash their faces with cheap credit, risk crashing into a wall. It is perhaps a philosophical debate as to whether inflation is the worst thing in the financial markets. Some might say that unemployment and corporate collapse are worse, especially if you believe that inflation will eventually burn itself out as demand weakens when prices rise.
This week in small caps was another of meeting several companies, and I welcomed being eyeball to eyeball with the management of companies. This is admittedly rather old school. These days there are numerous keyboard warriors and bloggers who feel they can make pronouncement on companies, either good or bad, without having met, or at least being very familiar with them. Having interviewed hundreds of companies over the past decade, and met dozens, I think that puts me in a privileged position.
For instance, I actually visited Celadon’s (CEL) extremely hi tech and impressive operations last year, spoke to management, and was presented with the nitty gritty of the medical cannabis space. The recent update to the Home Office licence enables the company to commence the commercial supply of its GMP pharmaceutical cannabis product, something which is a game changer not only for the company, but also for patients, and the UK economy. To be negative at this stage is like tripping up a marathon runner just as they cross the finishing line.
I am reminded that a company which I interviewed recently, Ananda Developments (ANA) has also pushed ahead in the medical cannabis space, with its acquisition of MRX Global, something which will enable it to sell MRX’s cannabis products for medical use. It is clear that 2023 is a breakthrough year for medical cannabis in this country, and down the line the sector has the potential to produce unicorn sized companies in the manner that anyone familiar with the GW Pharmaceuticals story will be aware of.
One of the companies I was delighted to meet this week when they were in town was Conroy Gold (CGNR). While it has not exactly been an overnight success, it would appear that as we note the resurgence of Gold itself, the company has been making significant discoveries in “Bandit Country” the border between Ireland and Northern Ireland. What usually happens when mini mining companies announce a significant find is that the market recoils thinking that a big cash call is on its way. However, with CGNR, what seems to have been missed is that the company signed a joint venture agreement with Demir Export A.? over the licences held along its 65km district scale gold trend in the Longford-Down Massif in Ireland. This means the more Conroy finds, the more Demir will fund and development what it finds. There are few companies who are effectively bankrolled by such a benevolent backer. Shares of CGNR are now at 16.75p versus as high as 35p plus in the wake of the JV announcement, this despite significant new Gold discoveries.
Sticking with mining, I bumped into Russell Fryer, CEO of Critical Metals (CRTM). Here the shares have deserved had a strong run since returning to market back in September. Indeed, I spotted the trendline break at 12p, after which the stock peaked at 34p in December. The opportunity here that with production having started at Molulu in January, and the company forecast to produce an initial 120,000 tonnes of copper oxide ore per annum, the market’s approach that it is better to travel than arrived seems misplaced. Helping to remind us that CRTM should be back at its peak was decent coverage in the Sunday Press, highlighting that Fryer is the largest shareholder here, and that mining sector colossus Ian Hannam, is on the shareholder register at 10%. The implication is that there is much more to come at the company than production at Molulu.
Hi 55 Ventures / Fragrant Prosperity
Interviewing CEOs can be a 24/7 occupation, and I was happy to interview Hi 55 Ventures CEO David Brown, in the wake of the payroll finance group’s news of a deal with Fragrant Prosperity (FPP). A highlight here is that investors here still have a chance to buy HI at the pre deal announcement price of 60p versus the £1 that FPP has offered ahead of a Reverse Takeover. There is the chance of effectively buying £1 for 60p until March 31 via NR Private Market. But there are other bullet points to consider. For instance, the recently agreed AIG insurance wrap means the banks can lend to SME’s taking the insurer as the rating therefore allowing SME’s to get access to capital and efficient for the banks.
This is important as with the economy struggling, redundancies are happening at pace, and funding payroll (the largest cost to SME’s) would be an attractive option to retain the workforce. Given that the cost of living crisis particularly affects pensioners, Hi’s launch of its Freedom of Pay initiative for the UK pension market from 15th June is timely. It is backed by the largest pension administrator “Mercer’s”. Finally, there is the myth that Hi is some kind of payday lender. It should be remembered that it is free to employees and pensioners, and could actually be seen as potentially ending the hegemony of the payday brigade.
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