6-8 Week Bull Run: Recovery Signal?

• Commentary: Bullish wave ebbs, Santa rally cancelled? What will a small cap recovery actually look like? Positive signs from the last 3 months, big capital raises happening again.
• Quick Takes: AL3, PUR, 88E, TG1, MTH, JBY, GTR, KNI
• This week in our Portfolios: EIQ, AL3, MTH, KAU

After 24 months of rough small cap markets...

There were a glorious handful of green, bullish weeks during October and November.

Had the small end of the market finally returned?

Multiple green weeks, back to back...

Great announcements led to sustained share price moves upwards on volume.

Proper amounts of money being raised by small companies.

And the chance for the small cap market to lock in a stunning comeback...

and win back investor hearts and minds.

with a roaring “Santa rally” into Christmas...

No deal.

There was a quiet, cautious pause over the prior week...

And this week the small end was back to its bear market antics again.

Low volumes, stand-offs between buyers and sellers, this time with buyers caving.

Culminating in a pretty gross Friday trading session across the board yesterday.

(our latest portfolio addition ION didn’t get the memo, finishing the day up 23%, closing at a new 18 month high)

To be fair, it was probably wishful thinking that the market would go up in a straight line after so many investors have been starved of a win for the last two years.

With many stocks up for the first time (in a long time) during October and November...

And the pain and lack of liquidity of the last two years are still fresh in people's memories.

Many took the chance to lock in the rare gains this week, before the Christmas break.

However...

There is a big positive to take away from the last 3 months.

Over the last two years it was rare to see a good, fully green week.

Let alone two in a row.

It was grim.

So for the small end of the market to have finally strung together a full 6-8 week bullish run is certainly a big milestone for positivity returning.

It got us thinking on what a full recovery into a bull market might really look like.

The small cap market recovery won’t be instant, like many (including us) are hoping for.

It will likely be a series of progressively longer and stronger “waves of bullishness”.

Like the 6-8 week bullish wave we just saw come (and go).

Hopefully with progressively shorter and shorter “bearish recoveries” in between.

It also got us thinking about an analogy we often use about the market recovering from its “hangover” after the 2020-2021 “party”.

(probably the biggest party of the last 40 years... with a hangover to match)

Many of us have probably recovered from a major, crippling hangover at some point after the biggest party of our lives.

You don’t just suddenly decide to jump out of bed and go for a run.

You need time to heal...

First build up the confidence to open one eye.

Then eventually... the other.

You then build up the courage to consider reaching for your water bottle.

This basically summarises the first 2 hours.

The small cap market equivalent to late 2022.

Eventually you get up, shakily take your first few steps like a baby dear...

Attempt to eat some food... and then lie back down (2023)

Later... a small walk, possibly even outside.

Progressively bigger and stronger steps to getting back to normal function (2024)

With less and less moping in between.

Which finally leads to being able to get out for a run or do some proper exercise again (2025?)

(exercise being unimaginable at the time your first eye opened)

Most of us have small kids now and don’t drink much anymore, so another analogy that also works is coming back from a serious injury.

Like a sprained ankle, knee injury or broken collarbone.

Initially after the injury - it’s unimaginable to even move or do much of anything.

But over time the body heals and pain subsides.

...and small occasional movements become possible.

The movements get better, stronger and more frequent.

Confidence grows and you start doing all the boring exercise homework from the physio.

The exercises get more intense each week, with shorter rests in between.

Then finally you are back to full strength again and it’s like nothing ever happened.

...until the next injury for those of us silly enough to still be trying to play social team sports approaching middle age.

(Which is actually a great analogy to the next small cap crash - it takes ages to recover back upwards, but the crash is usually sudden and unexpected...)

The point is...

The small cap market's recovery will likely be like that from a hangover/sporting injury.

Initially it's slow moving, painful, seemingly never ever ending.

But with time passing, confidence grows, you get longer and stronger periods of strength and recovery.

Until it finally gets back to normal.

Whether self-inflicted (hangover) or accidental (injury), humans need time to slowly recover and build back confidence in increasing waves before getting back to normal function.

Small cap market sentiment is basically the collective emotions and mental state of hundreds of thousands of humans participating in the market.

So it's no surprise to see its recovery mimicking how humans individually recover.

The 6-8 week bullish run we just saw is excellent progress.

Hopefully the next is a 10-12 week bullish run in early 2025.

(before “sell in May” rolls around)

While it felt slow this week, the last few months have actually been pretty solid...

At this time last year, many small companies had run out of money, and we saw many “desperation raises” before Christmas.

You know the ones - raise sub $1M, with a 1 for 1 oppie and steep discount to coax scared investors to part with their precious cash.

This was just to stay alive... forget about doing any actual real work on their projects.

Compared to that, over the last few months we seen some of our Portfolio companies pull off a pre-Christmas “mega raise” and have set themselves up for a big 2025:

• AML3D (ASX:AL3) raised $30M at 19c to scale its additive manufacturing business into the US.
• Oneview Healthcare (ASX:ONE) raised $20M at 29c to expand the ramp up of sales into hospitals under the Baxter partnership.
• SunSilver (ASX:SS1) raised $8M at 62c and then immediately a further $5M at 80c with a strategic investor to drill out its giant silver-antimony project in Nevada, USA.
• Mithril Silver & Gold (ASX:MTH) raised $12.5M at 50c to expand its gold & silver resource in Mexico.
• Titan Minerals (ASX:TTM) raised $20M at 44c to “get cracking” on its gold & silver porphyry project in Ecuador (can’t believe that “get cracking” made it into the announcement title).
• Minbos Resources (ASX:MNB) has been securing long awaited project financing deals and this week went out to the market to raise some operational cash too - finally looks like they are about to get it done in 2025.

Special mention also to Vulcan Energy Resources (ASX:VUL) this week that also completed a €100M stock placement, secured a €120M commitment from export finance Australia and finalised EIB board approval for up to a €500M financing facility.

By securing this capital before the end of the year, each of these companies have set themselves up nicely to deliver on some key milestones for 2025.

Raising this type of money in the small end of the market was unthinkable this time last year.

This is a potential sign of a return to normal market conditions, particularly in some pockets of the small cap sector.

(Anything precious metals, or promising technology stocks is looking good at the moment).

The announcement this week from MTH hit it home for us.

In that announcement Managing Director John Skeet said that the company is planning ~40,000m of drilling in 2025.

That sort of aggressive drilling plan is almost exclusive to a bull market...

In rough markets pre-revenue companies will generally get as much good news out as possible, raise some cash and then find ways to preserve the capital to “get through the rough patch”.

But, for a few stocks in our Portfolio, it is full steam ahead with much larger than expected raises and ambitious growth targets for 2025.

For AL3 the last few years have been about building a customer pipeline while operating out of its Adelaide facility and eeking out just enough revenues to get to breakeven.

With entry into the US things have now dramatically changed for AL3 and it is in full “scale-up” mode now.

A few weeks ago the company raised $30M at 19c, which was about 1⁄3 of the company’s market cap.

This week, AL3 signed a AUD $2.27M deal AND it officially opened up its US facility.

Not to mention, the company is already on the lookout for a second facility in the US.

A strong way to close out the year.

The raise sets the company up to chase mega deals in the US from its deep-pocketed US partners.

TTM is another one of our Portfolio companies that for years had been scraping through by the skin of its teeth...

Then suddenly, TTM raised a nice chunky $20M.

This is the biggest raise TTM has done since we first Invested in the company back in 2020.

A company that has never had more than $5M in the bank account at any given time now has $20M cash to drill out its 3.1M ounce gold + 22M ounce silver resource in Ecuador.

Some pretty big investors came onto this $20M raise - Tribeca Investment Partners increasing their stake in TTM up to 14.29%.

This is in addition to Gina Rinehart’s Hancock Prospecting spending up to US$120M to drill out TTM’s copper project in the region as well.

TTM is drilling right now, and for the first time in 4 years we get to see the company “aggressively drill” its projects with the cash runway to support it.

Finally the company can look to multiply its giant JORC resource and show us the real size/scale potential of its copper porphyry targets.

It was the same story for MTH...

In May this year, the company was suspended because it couldn't raise enough cash to drill its project.

At the time the major backers of the company were its three directors...

Now it has 4 institutional investors backing the company and $17.6M in cash to drill out and multiply its gold-silver resource.

(that 40,000m of drilling next year will be fun to follow)

If someone had asked us six months ago where AL3, SS1, ONE, MTH, MNB and TTM would be right now, we would have been hopeful that the share price was materially up and surprised (to the upside) at just how much cash these companies have been able to secure.

It’s a testament to the teams behind each of these companies and it shows just how quickly things can change in small cap land.

We remember around this time last year when there were a lot of sub-$1M “kick the can down the road” capital raises and convertible note placements...

A fair chunk of our biggest holdings are in seriously good shape for 2025 considering the last two years in the small cap market.

And as Investors in a broad Portfolio of small cap stocks, where many will fail, we only need a few good winners to carry the Portfolio.

What happened with LYN?

LYN finished drilling its project in the West Arunta this week.

Off the back of that announcement LYN’s share price came off ~50%.

LYN opened the week at 21c and closed the week at ~9c.

Another exploration roll of the dice that didn’t work out.

The “exploration risk” we identified and accepted in our Investment Memo appears to have materialised.

Usually a sell-off like this will tend to come after assay results have been published as at that point the market can digest whether or not the drilling was a success or not.

(Particularly if the assay results are poor).

In LYN’s case, no assays have been published yet, however the market seems to have reacted to what wasn't in the announcement.

A fair few West Arunta exploration companies in the past have reported visuals/XRF readings going into assay results - things like “mineralised carbonatite intercepted” or “mineralised IOCG system identified”.

These don't give an indication of the assays in terms of grade of discovery, but they do confirm whether or not the correct type of rock has been hit in order to make a discovery.

LYN’s announcement was vague on these visuals only mentioning “pathfinder/trace elements” and hinting at “future drilling programs”.

(Source)

The technical director resignation the day after that announcement and a new director being appointed looks like a new direction is coming for LYN.

LYN ended the week trading at an ~$4.8M market cap and had a ~$4.2M cash balance at 30 September.

LYN has a good capital structure and lots of cash in the bank to find a new project

Some of LYN’s last reported cash has likely been spent on the relatively small drill campaign, but we should see the share price find a new base between now and when the next quarterly report is published at the end of January next year.

We are holding 947,000 LYN shares and will eagerly wait to see what happens with the company next with the new board composition.

An update on our “Christmas Catalyst list”

Going into the end of the year we set a list of catalysts that we were looking forward to seeing before the markets (unofficially) shut for a few weeks over the Christmas/New Years period.

We first put that list together on the 16th of November and this week a fair few of those catalysts (and some surprise ones) came in:

Pursuit Minerals (ASX:PUR)

PUR published a 339% resource upgrade for its lithium brine project in Argentina.

PUR now has a 1.104Mt LCE JORC resource at 505mg/l.

This is higher than Argosy’s resource at 731kt LCE at 329mg/l, which is a reasonable ASX comp for PUR.

Argosy is more advanced compared to PUR with an active pilot plant and plans to upgrade it to 2,000tpa of LCE.

However, PUR is now moving into permitting to get its own pilot plant up and running which could close the valuation gap between the two companies if PUR can get there quickly.

Just this week Rio Tinto announced a $2.5Bn expansion to its lithium brine operations in Argentina - a clear sign of interest in growing capacity in the region.

GTI Energy (ASX:GTR)

GTR upgraded its US-based uranium resource by 50%.

Now has a total 10.23Mlbs across three projects in Wyoming.

This is good timing given that the US government is again, this week, trying to encourage domestic uranium production and enrichment.

GTR’s project is ~15km away from the biggest US ISR processing plant owned by $37BN Cameco.

AND GTR recently brought onboard the ex-head of Cameco Australia as its new director...

GTR will now move to conduct a Scoping Study over the project, and we should get a decent idea of what the company’s “pounds in the ground” are worth in terms of project economics in the first half of 2025.

Kuniko (ASX:KNI)

KNI also published a resource upgrade for its nickel-copper project in Norway.

The mineral resource is the product of successful drilling at the project, which grew the resource to a total resource of 40Mt at 0.25% nickel equivalent, including both Indicated and Inferred categories.

That is roughly double the previous resource.

Importantly though, this resource upgrade was from only a small section of the wider Ringerike Battery Metals District, which KNI says shares similarities with the massive Voisey’s Bay nickel project in Canada.

We’re looking forward to what KNI can turn up across the rest of the project, given the company has a fair few drill ready EM conductors as priority exploration targets.

Read our KNI Quick Take

AML3D (ASX:AL3)

This week AL3 won a $2.27M competitive tender in the US energy/utilities industry.

This is a new market for AL3 and could serve as a case study for more sales into the utilities sector.

AL3’s customer, Tennessee Valley Authority, provides power to over 10M residents in the heartland of the US.

And the ARCEMY unit that AL3 sold to them will be the first made at the company’s new US facility in Ohio which also opened this week.

Great news for AL3 and that one sale represents ~31% of AL3’s FY24 revenues.

AL3 has managed ~$18M in sales over the last 18 months since AL3 switched its sales strategy to focus on the US.

Having just raised $30M cash we think it's looking very good for AL3 right now.

Read our AL3 note

Who is still left on our pre-Christmas announcements list?

Here are the companies from our Nov 16th list that are yet to announce pre-Christmas news:

• Oneview Healthcare (ASX:ONE)

We hope for a big deal from ONE’s partnership with Baxter ($24BN market capped healthcare supplier, that is the biggest hospital bed supplier in the US).

Read our latest ONE note

• Condor Energy (ASX:CND)

Prospective resource estimates for the company’s large oil and gas project in Peru.

Update: On Tuesday, CND announced that insights generated from recently reprocessed seismic data points to the potential for a 500m (or more) gas column at its huge 4858km^2 project offshore of Peru. The results will be incorporated into an updated resource assessment that is due to be released “soon”.

Read our latest CND note

• Global Uranium and Enrichment (ASX:GUE)

In early September GUE flagged that a scoping study is due in the “coming months” - hopefully that comes in before Christmas with some good numbers for GUE’s ~52Mlb uranium project, OR any positive update on GUE’s enrichment tech.

Read our latest GUE note

• Genmin (ASX:GEN)

The latest GEN quarterly report flagged that we can expect a project financing update “by the end of the year”.

Read our latest GEN note

What we wrote about this week 🧬 🦉 🏹

EchoIQ (ASX:EIQ)

We now have a clear pathway to first revenues in the USA for EIQ.

And the numbers mentioned this week are a step change higher from the market guidance only a few months back...

EchoIQ (ASX:EIQ) has an FDA cleared, AI-powered algorithm that helps cardiologists detect heart diseases.

It does this by analysing 3D images of the heart created by “echocardiograms” - ultrasounds of the chest or “echos” for short.

This week, EIQ announced it has identified a “reimbursement code” that will provide US$100 to $150 per echo that uses EIQ’s tech on a fee per use basis.

This is materially higher than the expected reimbursement value of US$68 per echo that EIQ guided the market on in September.

Read: ⛏️ EIQ: First US revenue with this code?

AML3D (ASX:AL3)

AML3D (ASX:AL3) has already delivered $14M of contract wins in the defence industry.

It has also signed deals in the aerospace industry - including with Boeing.

This week AL3 won a $2.3M competitive tender in the US energy/utilities industry.

The sale proves they can quickly enter a large, new market.

Read: ⛏️ AL3 makes large sale, enters new market: US utilities

Mithril Silver and Gold (ASX:MTH)

Gold and silver prices have surged over the last four weeks.

... with the biggest gains delivered over the last few days.

Mithril Silver & Gold (ASX:MTH) is back too - announcing that they are already well into their next set of drill holes at their gold and silver project.

We are now expecting 6 new drill results from MTH in the near term.

Read: ⛏️ MTH: Six new drill results incoming... gold and silver prices surging

Kaiser Reef (ASX: KAU)

Discovered in 1861, the A1 gold mine in Victoria has produced over 600,000 ounces of gold.

That’s ~$2.6 Billion worth of gold at today’s gold price...

Our Investment Kaiser Reef (ASX:KAU) now owns the A1 mine.

This week, KAU announced drilling has commenced to test if the high grade gold continues deeper than the old time miners were able to reach...

And IF KAU finds more high grade gold, they can quickly mine, process and sell this gold using their operating gold processing plant.

Read: ⛏️ KAU: Gold drilling commenced at never before mined depths of one of Australia’s highest grade historical gold mines.

Quick Takes 🗣️

AL3’s New Sale to a US Utility

PUR increases JORC lithium resource by 339%

88E seismic reveals 10 leads - prospective resource estimate due next

TG1 picks up option on an NT copper project

MTH drilling ongoing - resource update in Q1-2025

JBY shows up to 4% copper and 6,874g/t silver

AL3 Opens US Facility, With War Chest to Scale

GTR upgrades US uranium JORC resource

KNI releases upgraded European Nickel-Copper Resource

Macro News - What we are reading & listening to 📰

Energy:

Strategic Industries Surging: Driving US Power Demand (Grid Strategies)

• Over two years, the U.S. 5-year electricity demand forecast rose nearly fivefold, projecting a 15.8% increase by 2029, driven by growth in data centers, manufacturing, and electrification.
• Significant investment in new generation and transmission is required to meet demand, but planning and permitting challenges risk delays in addressing this growth.

Lithium:

Lithium supply surplus set to stay with battery makers' help (Reuters)

• Despite weak prices, many lithium mines, especially Chinese-led ones, continue production to maintain supply chains and market share, contributing to a global oversupply expected to last until 2027.
• Some mines operate at a loss, supported by battery makers or governments prioritizing strategic EV sector growth and resource security.

Uranium:

Meta seeks up to 4 GW of new nuclear power to help meet AI, sustainability objectives (ESG Dive)

• Meta is seeking 1-4 GW of new nuclear capacity by the early 2030s to support its AI and sustainability goals, targeting both large-scale and small modular reactor projects.
• Following tech giants like Microsoft, Google, and Amazon, Meta aims to accelerate nuclear development alongside its investments in renewable and geothermal energy.

Are you a s708 sophisticated investor?

If you qualify as a sophisticated investor and would like to see “s708 only” sophisticated investor opportunities: Subscribe to Next Cap Raise.

You will need to send us a valid certificate from a qualified accountant confirming you qualify as a sophisticated investor.

Have a great weekend,

Next Investors