New Portfolio Addition & Flow tests are coming in hot.

What Happened?

• Commentary: New Portfolio Addition. Flow tests are coming in hot. AI generated poems about ASX announcements (what?). Gold and silver are ripping.
• Quick Takes: 88E, GLV, ONE, ALA, HAR, EMD
• This week in our Portfolios: GEN, 88E, EXR

The big end of the market keeps hitting all time highs

The small end of the market yet to move.

We think there are some quality opportunities out there in small caps.

And we’re trying to make well timed entries before the small cap market eventually emerges from its slumber.

On Tuesday we added the first new company to our Portfolio for 2024.

The company is Genmin (ASX:GEN).

GEN is a green iron ore developer aiming to put its construction ready project in Gabon into production in the next 18 months.

We think green steel will be a big macro theme of the next few years and with green iron ore a key ingredient for green steel, we think GEN is well placed to capitalise on the theme.

GEN has been working on this project for nearly 10 years, tens of millions of dollars have been spent to get to this stage.

We like the 10c entry point into GEN.

Before we became shareholders at 10c last week, GEN originally IPO’d at 20c in 2021 and traded as high as 32c.

GEN last traded at 18c before going into suspension in August 2023 while it waited for clarity on the political situation in Gabon, and then on new funding.

After 9 months of being suspended, GEN emerged from a recap raise this week which was done at 10c, which is our entry point.

GEN is now debt free, and is emerging with circa $12.6M in cash (pro forma assuming the $28.3M is raised in full).

All permits and mining licences are now in place, rail and port deals are signed, and an “emissions free” energy source has been secured from a nearby hydro-electric dam.

GEN is about to take its next step to finance and build its project over the next 18 months, and become a green iron ore producer...

We like our entry point of 10c given all the work and money spent over the last 10 years and since the 2021 IPO, and previous capital raisings at much higher share prices, AND now GEN is debt free and has cash to progress its project.

GEN is now set up for success, and our strategy here is to leverage all the past work and investment made that has progressed the project, but at a better entry point of 10c.

(which hopefully allows for more upside as the company delivers on its objectives).

We have had success with this style of investment in the past with ONE, where we got in at a great price after years of work by the company and tens of millions had already been invested at higher share prices.

We have also been on the opposite side of the table with WHK, where we have been longtime shareholders and participated in lots of cap raisings at higher prices, while some new investors enter in recent placements at lower prices and get all the benefit of the past work without years of holding and investing like we have done.

Recap raises are great if you get the timing right.

A recap raise is great for new investors (like us at 10c in this case for GEN), not so much for existing long term shareholders, unless of course they average down.

We like the concept of finding existing companies with a real project/business that has had years of work and investment, but is trading at its lowest levels.

(obviously we need to be comfortable with the reason its trading so low, ideally it’s mainly due to delays on guided timelines OR some sort of temporary macro reason out of the companies control but should resolve over time)

For 2024 our plan is going to stay the same as it was during the negative sentiment market conditions in 2023.

We are going to keep looking for (in our opinion) undervalued stocks where we like the project and management team, in a strong or emerging macro theme.

We are also on the hunt for later stage projects/businesses that are trading at yearly or all time lows and considering (or doing) a recapitalisation raise.

Reply to this email if you know any, there should be plenty around while raising cash for small caps is difficult in these low sentiment conditions.

Our best performing Investments to date have been made during bear market conditions in the small cap market and then held into bull market conditions .

(2020 bear market into the 2021 bull market).

We will look to add about 10 new investments in 2024.

Our oil and gas stocks are getting some love...

GLV has seen a strong move up in just a few weeks since our last note, and came off a little bit at the end of the week.

GLV is already up over 200% on our Initial Entry Price:

There’s still a long way to go before drilling, and it's early days for the company - at ~$23M we think the market cap is still relatively low for a pre-drill O&G explorer and there are plenty more major milestones to tick off for GLV.

While GLV still has its major drill event ahead of it, a few of our other oil & gas Investments are now running (or planning to run) flow tests.

88E, EXR, IVZ and NHE are all doing flow tests in 2024.

After a discovery is made, the next step for an oil & gas explorer is to test how much “flows” out of the well, and if the flow rate is enough to be commercial.

Yesterday EXR wrong-footed the market by announcing a significant flow rate weeks ahead of its planned stimulation and flow testing program.

EXR announced 1.3 mmscf per day stabilised flow rate from its Daydream-2 well.

It also achieved a peak flow of 2.3 mmscf per day...

This is ONLY from the unexpected FREE GAS zone that they hit while looking for tight gas.

It’s the flow rate from the zone that DOESN’T need stimulation... which is how they managed to flow it ahead of the planned program.

There are still SIX more tight gas zones that will be stimulated and flow tested in the coming weeks.

With a big start of 1.3 mmscf per day gas flowing from the free gas zone, we just need a few more mmscf/day from the 6 further zones for the flow to be commercial (in our opinion).

And we will find this out in the coming weeks when EXR runs the planned stimulation and flow tests...

Click here to read our EXR flow test note

It’s a pretty big result, EXR flowed gas at a steady state from a reservoir that it never intended to intercept.

Interestingly, it wasn't even part of the plan to flow test that reservoir, the plan was always to go back and stimulate the unconventional parts and get a flow test post stimulation.

The market liked it with EXR showing its biggest volume and single day share price rise in years.

(EXR closed up ~27% on almost $3.8M of shares traded)

now on a slight tangent...

We have been working with artificial intelligence (AI) lately to assist with stock analysis and tracking our portfolio companies and potential new portfolio additions.

For a bit of fun, we asked our AI to convert the EXR surprise flow test news into a poem...

here’s what it came up with:

We were impressed...

So the obvious next step was to use AI to generate a rap song about EXR’s early flow test results, with Neil doing it in Snoop Doggs voice .

Watch it here.

(Disclaimer: AI generated rap songs based on AI poems made as a joke should not form part of any due diligence process when considering an investment)

88 Energy (ASX:88E) also put out a flow rate announcement this week.

We think this week’s news was the biggest achievement 88E has delivered in recent years - after many exploration drilling events, it has finally been able to flow oil to the surface from its Alaskan assets.

88E recorded a peak flow rate of 70 barrels of oil per day from the first of two reservoirs being tested at its Hickory-1 well. One more flow test result is expected next week.

88E’s results so far are broadly in line with the ~45 to 108 barrels of oil per day UK listed Pantheon Resources was getting on its ground immediately to 88E’s north.

The key difference between the two is that 88E’s flow test result came from a reservoir that Pantheon hasn't discovered on its ground yet.

The market definitely liked the news with 88E’s share price up ~62% on the UK markets the day the announcement went out.

The ASX was a little slow to react and moved the day after - typically the ASX tends to follow the UK’s lead from the night before.

As we noted above, 88E still has one more reservoir to flow test in the coming days - based on company timelines, that news could arrive as soon as next week.

And now, for an AI generated poem based on 88E’s news:

In the 2024 “Year of the Flow Test”, we are now waiting for IVZ and NHE to announce their plans and more specific timelines for when we can expect their flow tests.

Hopefully some positive AI poems about IVZ and NHE’s results next.

Gold and silver ripping, charts look really good... we are following...

All eyes are on the US Fed:

( Source )

And the gold and silver charts are responding.

Here’s gold over the last 6 months:

And silver is popping too:

How does this commodity price movement correlate with stocks though?

There was some buying in gold/silver names this week, but nothing of any significance especially in the juniors.

This goes against what is happening as the gold price goes up though...

The juniors with resources in the ground are seeing the fundamental value of that resource (in $ terms) increase as every day passes.

In ground resources become more valuable for anyone with a hungry mill operating below capacity (or in some cases idle).

The value proposition for the mill owners to buy and then start processing those in ground resources starts to make a lot more sense with every increase in the gold price.

Even projects that may not have been economically viable to develop on a standalone basis and were being written off by the market are likely starting to look interesting.

All in all, we expect to see capital flow down into the mid-caps first, (the projects with existing JORC resources near hungry mills).

Then eventually, once those assets are cleaned up and there aren't many names with decent resources, capital will likely move into the higher-risk exploration sector, where the aim becomes making new discoveries.

Discoveries are rare, but once they are made, they can be truly company making.

Good recent examples are the discoveries made by De Grey Mining in WA and Predictive Discovery in Guinea.

We are focused on finding companies where market caps are often <$50M - the smaller capped companies with big resources, underappreciated by the market or the junior explorers where we also see 1,000% re-rate potential.

We are close to making some new Portfolio additions in the space so be on the lookout for those over the coming weeks/months...

What we wrote about this week 🧬 🦉 🏹

⚠️New Investment: Genmin (ASX:GEN)⚠️

Our new Investment plans to produce and sell GREEN iron ore within 18 months via a starter mine, and it's got a clear pathway to grow its production over time.

We’ve got 13 key reasons why we’ve Invested in GEN which you can read in the link below.

Read: ⛏️ New Investment ASX:GEN: Green iron ore for green steel - first production in 18 months

88 Energy (ASX:88E)

It was the biggest achievement 88E has delivered in the last 4-5 years.

88E delivered a flow rate of oil to the surface from its Alaskan assets.

88E recorded a peak flow rate of 70 barrels of oil per day.

Read: 🛢️ 88E did it - a flow rate of oil to surface - and there’s one more result to come

Elixir Energy (ASX:EXR)

Surprise?

EXR just announced 1.3 mmscf per day stabilised flow rate from its Daydream-2 well.

It also achieved a peak flow of 2.3 mmscf per day...

Read: 🛢️ Surprise Flow rate? Sounds good to us EXR

Quick Takes 🗣️

88E: 88E Flows Light Oils - Discovery Confirmed

GLV: Multiple Stacked Targets At The Bonito Prospect

ONE: ONE Signs Large Deal - Grows Contracted Beds By 12%

ALA: Arovella Adds Esteemed CAR-iNKT Cell Pioneer

HAR: HAR Initial Metwork Confirms >96% Uranium Extraction

EMD: EMD Gets an AP Specialist and $1.5M for First Responders

Bite sized summaries of the latest mainstream news in battery metals, biotechs, uranium etc:

🎈 The Future Money: https://future-money.co/

Macro News - What we are reading 📰

Lithium:

US lithium demand predicted to grow nearly 500% by 2030 (Fastmarkets)

Copper:

Copper price jumps to new 14-month high on supply risks, demand hopes (Mining.com)

Battery Metals:

Surge Battery Metals to begin drilling at Nevada North lithium project next month (Mining.com)

Gold:

Record prices and surging demand set to continue for gold and silver (Small Caps)

Uranium:

Uranium is being mined near the Grand Canyon as prices soar and the US pushes for more nuclear power (AP News)

Have a great weekend,

Next Investors