Silver and gold shines again while med-tech companies make moves

The sun is starting to shine again.

The AFL Grand Final looms at 2:30pm today.

We had the day off yesterday but were still watching the markets.

...and it appears that the small end is trying to come back from behind.

If the first two quarters of this year were a lacklustre spectacle, Q3 - the premiership quarter - has been fascinating to watch.

Some solid on field performances this week from our med tech stocks...

But the best on ground are precious metals gold and silver.

Sorry... ok that’s enough of that.

Apologies to non-AFL/sports readers, we’ll stop now...

This week our high grade gold and silver Investment, Mithril Silver and Gold (ASX:MTH) was kicking some serious goals on the charts...

MTH went on a scintillating run.

At one point MTH was up 785% from the lows earlier this month to score a high of 81.5 cents on Wednesday.

(ok NOW we’ll stop)

The price run was on enormous volumes - over or around $5M traded for five days in a row.

The market clearly liked the “globally significant” intercept MTH put out on Friday last week, from its large “district scale” project in Mexico.

It was a 33m intercept from SURFACE at average grades of 31.8g/t gold and 274g/t silver.

And we are now waiting on a drill result to test if this mineralisation extends... this is the next MAJOR catalyst in the pipeline for MTH that could be announced any day now.

We mentioned last week in our weekender note that we were seeing large funds coming into small cap gold and silver stocks at a premium in placements.

This week we saw Canadian precious metals fund 1832 Asset Management buying up ~10% of MTH on market, which contributed to the price run:

(Source)

MTH also started trading on Toronto exchange last night under the ticker MSG... (yes like the flavour enhancer that makes Chinese takeout taste so good).

Canadians love precious metals.

Almost 61% of all exploration companies in Canada focus on precious metals exploration (which is up from 47% in 2013).

(Source)

Canadians “get” precious metals, they understand it and they like it.

With MTH’s listing on the TSX-V, Canadian investors can now buy shares in the company just as easily as Australians can.

MTH has delivered share price success in the past.

In 2020, the company went on a ~500% run over four months on similarly impressive drill results and the beginnings of a genuinely impressive high grade gold/silver resource.

The company published a JORC resource of 11M oz silver and 373,000 oz gold.

(that’s 529koz @6.81 g/t AuEq)

However, at that time the precious metal sentiment turned negative, and then the “2022 small cap bear market” kicked in.

The company ran out of cash and eventually had to do a re-capitalisation or “re-cap” raise earlier this year.

(Which is where we Invested, in the hope that precious metals sentiment would turn and the market would re-rate MTH’s assets).

Finding these recapitalised companies with valuable assets is the basis for our new Emerge Portfolio.

Emerge companies are ones that are:

• Real, later stage company with a genuinely valuable asset/business.
• Company had fallen on hard times, bad luck that was not within its control OR previously ineffective board/ management team has been replaced.
• Currently or recently recapitalised, fresh cap structure and clean balance sheet to execute business plan.
• Sentiment swinging towards the macro theme in which the company operates.
• Another chance to execute business with a fresh, new investor base.

Well, we think MTH has now well and truly started to “emerge”.

Speaking of silver companies with quality assets that fell into hard times during the last precious metals lull and small cap bear market...

Yesterday, our original silver Investment TMZ released its “better late than never” 2023 annual report.

We noticed some interesting comments about recapitalising and coming back to trading on the ASX after being in suspension since March 2023:

(Source: Operations update, page 3 TMZ annual report)

A great climate to come back onto the boards with a solid silver asset if TMZ manages to get the recap done... it’s early, but is this some hope for long suffering TMZ shareholders (like us)?

Still on precious metals, Sun Silver (ASX:SS1) has performed on the big stage since its 20c IPO earlier this year.

SS1’s share price has been climbing over the last few weeks (almost in lock step with the silver price) and closed the week at 76.5c.

The SS1 share price quickly shook off an $8M capital raise done at 62.5c, which included an additional $5M taken up by a cornerstone investor at 80c, a PREMIUM to the price of the placement (so $13M in new funds total).

SS1 is currently drilling out its silver project in Nevada USA, and next we are expecting ongoing assay results from this campaign.

The precious metals macro theme delivered a game changing performance this week too.

On Thursday night this week silver briefly pushed higher than the previous decade highs it hit back in May this year.

Silver traded at the highest price in ~12 years:

(Source)

Although silver is considered a precious metal, over the last ten years industrial applications have been one of the key demand drivers for the commodity.

Specifically, silver's industrial applications in solar panels.

Yesterday, Elon Musk published a tweet (or an “X”, is that what it’s called now?) speculating that all energy generated could eventually be generated from solar:

(Source: this X post)

Obviously if the world generated 100% of its energy from solar, that would take a lot of solar panels...

And hence a lot of silver.

That’s a big call on the future from Elon Musk.

On Wednesday night we did get an expert insight into the current state of silver demand from the solar industry in a webinar called “$100 Silver: Solar Powered”.

The session gave us some great insights into the silver market and how solar energy could further drive demand for the precious metal.

(Watch the video here)

The panel included:

• Jenny Chase, Solar Analyst - BloombergNEF
• Philip Newman, Managing Director - Metals Focus
• Elvis Chou, Consultant - Metals Focus
• Daniel Woodbridge, Portfolio Manager - Volta Energy Transition Fund
• Simon Catt, Director - Arlington Group Asset Management

Here are some of our key takeaways from the discussion:

• Over the last 10 years industrial demand for silver has grown. Industrial demand was just 8% of the silver demand and has now grown to about 23%. This is particularly true for solar panels.
• Silver does make solar panels more efficient and accounts for around 10-13% of the cost. In the immediate term the solar panel price is not necessarily sensitive to the increase in silver price, however technology is always expanding on how to reduce costs and make panels more efficient. This is a risk to pay attention to.
• There is still a strong correlation between the rise in gold and silver... the two tend to move together. The gold price (and subsequently silver) has been driven by strong buying from Asian Central Banks. This is part of a plan by the east to reduce the reliance on the US Dollar, supported by precious metals buying.
• Almost half of the solar panels installed last year were from China (44%) and the country is still a huge player when it comes to solar panel demand.

These are just some of the takeaways from the talk, there are lots more interesting insights and discussions.

Our Investment, Mithril Silver and Gold (ASX:MTH) also got a mention towards the end as well as an example of how smaller silver stocks can re-rate quickly in the current market. (listen to the MTH mention here)

Good to see MTH's drill result getting some more international attention.

So it was a big week for precious metals stocks in general.

But what about other parts of the market?

It was a busy week in med tech...

Three medical tech companies in our Portfolio that we are watching closely are Echo IQ (ASX:EIQ), Oneview Healthcare (ASX:ONE) and Trivarix (ASX:TRI).

Here is a quick overview of what is happening...

EIQ

We recently announced our Investment in EIQ, an AI-driven med-tech company with a proprietary algorithm for detecting adverse heart conditions.

In the next week or so we should know the results of an FDA submission that, if approved, will support commercialisation efforts of its AI product to help cardiologists in a US$10 billion market.

FDA approval is the “holy grail” for biotechs and med techs as it opens up the giant US market and increases the chances of approvals in other countries too.

It’s a major share price catalyst, It takes many years of work... and EIQ will find out if they got it any day now...

TRI

TRI has requested a pre-submission meeting with the FDA on how to best conduct a final “pivotal trial” on its AI screening tool for Major Depressive Episodes.

Earlier this year the company published promising data, but will need to undertake a final Pivotal Study in order to meet the FDA threshold before getting its product approved for sale.

TRI has developed an AI powered algorithm to screen for mental health disorders by analysing a patient's sleep data.

The blue sky for TRI here is that if it turns out that sleep data CAN successfully be analysed by its AI to screen for depression, it is likely able to screen for OTHER mental health issues too.

(like anxiety, PTSD, bipolar, alzheimer's, etc - all huge markets on their own)

And then down the track, TRI’s AI could be refined to potentially be integrated into wearables like a Fitbit, Apple Watch or Oura Ring that all track simplified sleep data.

ONE

This week, our 2021 Tech Pick of the Year ONE made its first sale of its “My Stay Mobile” product.

ONE sells its technology to hospitals and other healthcare facilities through a recurring annual revenue model.

The MyStay Mobile is a high-margin, lower friction product that will reduce many of the barriers to selling into hospitals and improve ONE’s overall market footprint.

Also, US $20BN, NYSE listed hospital supplier Baxter decided things were serious enough with its recent ONE relationship to go “internet official”...

This week we saw the strong signs of Baxter’s commitment to promote ONE products as a value add to their large existing product range, to their sprawling US customer base.

Baxter now features ONE’s technology offering on its website:

(it’s like somebody with a lot of social media followers finally posting a photo of their new boyfriend/girlfriend... only happens once things are starting to get serious...)

Getting new tech products into hospitals.

Why we like med-tech as an investment thematic is because healthcare is a HUGE market, while the contracts can be “big and lumpy”, once a product is established in the ecosystem it is hard to disrupt.

This is because hospitals are generally slow to adopt new technology BUT this means that revenue is then reliable and sticky.

It is a double edged sword, as breaking into the hospital system can be a big, time consuming challenge, but once you're in, you're in.

To break in is hard, but the companies that make meaningful improvements to the status quo are well positioned to take on this challenge and enjoy the returns if successful.

One med tech company that has been able to establish itself as a powerhouse in the healthcare industry is Pro Medicus.

This week, the AFR published a feature on Pro Medicus, one of the biggest health-tech success stories on the ASX.

It’s worth a read as a case study for “what can go right” when investing in med tech..

(Source)

Founded in 1983 by a former GP, the company initially focused on medical practice management, but later pivoted to imaging technology in the early 2000s.

(Imaging technology is the space that EIQ works in).

Pro Medicus’ software allows healthcare providers to store, access, and analyse medical images faster and more efficiently, contributing to improved patient care and diagnosis in the radiology sector.

This $18Bn company is a staple in hospitals and over the last decade, the company has seen significant growth, through contracts with large healthcare institutions in Australia, Europe, and the United States.

Pro Medicus has ridden a wave of innovation within the med tech space and the stock started to take off in 2016/17 with a focus on cloud infrastructure for hospitals.

(An area that ONE is playing in).

Ultimately, Pro Medicus shows us what success looks like for a med-tech company that can break into the global healthcare systems and continue to improve and innovate on their products.

Here is what their stock chart looks like over the last 20 years:

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

Ultimately, we have rolled the dice on our three med-tech companies to achieve even some of the success as Pro Medicus has, and we are continuing to look at more investments in this space.

If you know of any other med-tech companies that we should be considering, reply to this email at [email protected].

What we wrote about this week 🧬 🦉 🏹

BPM Minerals (ASX: BPM)

A great time for a new gold discovery.

With the gold price on the rise and now at all times highs of over US$2,600/oz.

And finally, it looks like the market has got a taste for small cap gold stocks.

On Wednesday last week, our Investment, BPM announced a drill intercept of 30m at 1.8g/t of gold at its Claw project.

Read: ⛏️ BPM Announces New High Grade Gold Discovery at Claw Project

Echo IQ (ASX:EIQ)

Diseases of the heart are the leading cause of death worldwide.

But diagnosis is complex - and delayed or missed diagnosis costs lives.

EIQ is a med tech company that has a remarkably accurate AI based tool to detect heart diseases early.

Based on company timelines, FDA approval for its technology could happen any day now.

Read: 🧬 EIQ - Is FDA approval imminent? What happens after that?

Oneview Healthcare (ASX:ONE)

Two things we have noticed from our health tech Investment and 2021 Tech Pick of the Year, ONE over the last week...

And neither have been announced to the ASX...

Read: 🧬 First deal for ONE’s new mobile product. Baxter relationship now "Internet official".

Quick Takes 🗣️

AL3 to help US Navy supply chain?

More high grade US silver

TrivarX Requests Pre-Submission Meeting with US FDA

GUE Puts out Further High-Grade U Drilling Results

KNI hits more nickel, and returns high grade copper rock chips

TG1 completes ~$1M raise, famous investor now on registry

TRI appoints US healthcare executive to board

Macro News - What we are reading & listening to 📰

World News:

China Unleashes Stimulus Package to Revive Economy, Markets (Bloomberg)

• China's central bank cut a key interest rate and lowered bank reserve requirements to stimulate lending and economic growth.
• The move is aimed at increasing credit availability for infrastructure and business projects to counter the nation's economic slowdown.

‘NATO of critical minerals’ deal to hit China dominance (AFR)

• Australia, the US, and allies formed a critical minerals financing network to counter China's dominance in global supply chains.
• The partnership focuses on sustainable mineral extraction for defense, tech, and renewable energy projects.

Biotech:

Former Regal healthcare PM hangs up his shingle (AFR)

• Ex-Regal managers Craig Collie and Madusha Seneviratna are launching a $70m long/short healthcare fund.
• Coronet Investments will target healthcare stocks in the Asia Pacific with a market-neutral strategy.

Review of the impact of the FDA’s Fast Track Designation on biotechnology companies’ share prices (Science Direct)

• FDA’s Fast Track Designation boosts biotech stocks, with a 1-year average abnormal return of 76.64%.
• The COVID-19 pandemic may have amplified investor reactions, suggesting further research is needed.

TLX ASX: Telix on $1 billion spending spree to build US radio pharma network (AFR)

• Telix Pharmaceuticals is acquiring US-based RLS for $388 million to expand its radiopharmacy network for cancer treatments.
• Telix shares have surged, reaching a market cap of $7 billion as it strengthens its control over isotope supply chains.

Other content we consumed...

• A history of Novo Nordisk (Ozempic) | Acquired
• Meta Connect 2024: Everything Revealed in 12 Minutes
• John Mearsheimer and Jeffrey Sachs | All-In Summit 2024
• Why the Lithium Market Has Bottomed with YJ Lee (really good silver chat at 44 minutes)

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