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What Happened this Week?

Published 16-MAR-2024 10:00 A.M.


9 minute read

Another week of the small market looking... pretty OK.

Yet again we have seen a few of our portfolio companies rise off their 12 month lows.

A number of our Portfolio stocks released positive news...

The share price responded well...

... and then actually HELD their share price gains.

A welcome change from the last 12 months, where most share price rises on good news were met with instant selling.

Probably because people just needed the cash for life expenses and ran out of patience for the story.

Instant selling into positive news is typical small cap bear market behaviour:

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It's nice to finally see a few weeks where this HAS NOT been happening.

Biotechs continue to be the shining stars in small cap land.

Our 2021 Biotech Pick of the Year DXB released its long awaited phase III trial interim results this week...

And they were a success.

We had been waiting 2.5 years for these DXB results and they were a winner.

There was a great share price run up in the 6 months leading into the results as anticipation built. We gradually de-risked some of our position over this period, however still held a material position into the result, which we still maintain.

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DXB also raised $20M just as the result was announced, BEFORE the stock traded.

So the DXB share price is getting fed $20M of new stock, still opened higher and STILL traded above the cap raise price and massive volumes.

This time the plan worked out really well:

Patiently waiting for a major re-rate on a positive result.

It’s the kind of results we hope for with all our “major binary catalyst” style investments, specifically in biotech and oil & gas exploration.

We had been hoping for some similar share price action with our oil & gas explorer results for IVZ and NHE late last year...

Except there wast really a share price run up pre result, we DIDN’T de-risk enough before the result was announced, AND the market didn’t respond to the result announcement.

But it’s a new year and both IVZ and NHE have new, potential major catalysts coming up, we have increased our positions in both since the last result and we go again in 2024.

Our newest early stage oil & gas exploration Investment GLV’s share price has been ticking up nicely over the last few weeks.

GLV is still early stage and their major drilling event is a while away, so plenty of time for pre-drill work to de-risk the project and hopefully re-rate higher pre-drilling.

We are also very close to a flow test result with 88E, and later a flow test from EXR.

Most lithium stocks had a good week (later stage, not so much explorers).

Nickel still sucks, but there was some positive news this week which we’ll share in a second.

What we have noticed in the last few weeks is that the gold price is surging.

Each week the gold price keeps going up - during March its been trading at well above previous all time highs

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And the silver price (which generally tracks the gold price) has started catching up since the start of March

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These price rises are looking strong, which has piqued our interest in any gold or silver companies on the ASX (or private) that we might add to our Portfolio.

(reply to this email if you know any we should take a look at)

Gold and silver in the news

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Has the nickel bleeding stopped? Maybe...

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Key takeaways:

  • The nickel price collapsed by around 45% last year to currently trade around $17,945 per tonne on the LME, driven by massive supply growth from Indonesia that outpaced stalling demand from stainless steel and battery industries.
  • Macquarie has slashed its forecast for the 2024 global nickel surplus from over 100,000 tonnes to less than 40,000 tonnes, a "major change" due to expectations of higher Chinese demand and slower output growth in Indonesia.
  • While some forecasters see nickel prices recovering to the $20,000-$25,000 per tonne range, Bank of America warns that China is on the verge of becoming a net nickel exporter after its refined nickel imports accounted for 14% of global supply just 3 years ago.

What we think: It may take a long time for nickel prices to rise and perhaps longer for nickel stocks to come back. But ESG oriented companies in the right jurisdictions could benefit from a potential two price system - such as our Scandinavian critical minerals Investment, Kuniko (ASX: KNI).

What about lithium? Hints the worst could be over...

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( Source )

Key takeaways:

  • Short sellers betting against major lithium producers like Albemarle Corp. and Pilbara Minerals Ltd. have significant positions worth billions of dollars that could be under threat as signs emerge of a potential rebound in lithium prices after last year's slump.
  • Investment banks like UBS, Goldman Sachs, and Morgan Stanley have revised down their 2024 lithium supply estimates, indicating a potential tightening of the supply glut that contributed to the price crash in 2022.
  • While some analysts remain cautious about calling a firm rebound yet, others believe lithium prices are bottoming out or nearing sustainable levels, citing factors like production cuts by some miners, restocking demand, and a potential upside surprise in EV demand.

What we think: We’re Invested in 10 lithium companies and we know lithium can surprise, as we’ve seen over a couple cycles in which we’ve seen two Investments, achieve more than +2,000% returns from our Initial Entries.

These two companies are Latin Resources (ASX: LRS) and Vulcan Energy Resources (ASX: VUL).

With sentiment at a low ebb, we always remember that supply in the lithium market generally takes far longer than expected to come online - the long run should favour these beaten up companies if they can time their raises at cycle peaks.

We’ve also witnessed first hand the enthusiasm for lithium in the US at the inaugural Lithium Innovation Summit, in Little Rock Arkansas.

The lithium market might appear worse than it actually is.

Read more in two recent weekend notes:

Surfing the commodities cycles


Arkansas Lithium Summit - lithium come back?

Dimerix (ASX:DXB)

What happened this week: Our 2021 Biotech Pick of the Year, DXB, passed its interim analysis point for its Phase III clinical trial - a catalyst that we’ve been waiting more than 3 years for.

It also completed a $20M capital raise. Excellent news... is another major licensing deal to come?

Macro theme sentiment: Biotechs could be set to continue powering ahead after a brief pause for breath - the Biotech S&P ETF rhymes up more than 40% since last October.

Read more: DXB Announces Success on Interim Phase III Trial - China and US next for licensing deal?

Neurotech International (ASX:NTI)

What happened this week: our biotech Investment Neurotech International (ASX:NTI) revealed that the company’s Phase I/II clinical trial on Rett Syndrome has been extended for an additional 52 weeks.

All 14 patients in the trial will remain on NTI’s biopharmaceutical NTI164 for this time period, which we interpret as a potential leading signal of the efficacy and safety of the treatment.

NTI has a few big catalysts due in the coming weeks, which we are keeping a close eye on.

Macro theme sentiment: Positive - see DXB macro theme sentiment.

Read more: Good sign: NTI’s Rett Syndrome Trial Gets Extended

Sarytogan Graphite (ASX:SGA)

What happened this week: SGA produced graphite with five nines purity levels - purity up to 99.9992%, which is more than 50x purer than levels needed for use in batteries. This graphite sells at ultra premium pricing of more than US$25,000 per tonne.

Macro theme sentiment: Graphite sentiment has been positive, driven by Chinese export bans on graphite. China is the world’s major graphite and graphite products supplier.

Read: SGA’s Graphite for Nuclear Energy Production

Elixir Energy (ASX:EXR)

What happened this week: EXR prepared to flow test its QLD gas project which has a 3.6 trillion cubic feet (2U) prospective resource on top of the project's ~395 billion cubic feet contingent resource. EXR is working in the Taroom Trough - which shapes as an “Energy Super Basin”.

Macro theme sentiment: East coast gas concerns are easing somewhat after the government struck a deal with ExxonMobil and Woodside to supply 260 petajoules of gas into the domestic market by 2033.

With that said, gas remains a key pillar of the energy transition amid high energy prices - fragility of supply was highlighted by a recent fire in Queensland.

Read: EXR Preparing for a Flow Test at its QLD Gas Project

Haranga Resources (ASX:HAR)

What happened this week: HAR put out RC drill results from its uranium project in Senegal.

HAR owns 70% of its project which holds an existing uranium JORC resource of 12.4 Mt @ 587 ppm for 16.1 Mlbs of uranium.

The drill results came from in and around HAR’s existing JORC resource.

The drill results had widths ranging from ~1m up to ~39m with grades as high as ~1,095ppm uranium.

Macro theme sentiment: The uranium price remains significantly elevated at ~US$90/lb, retracing slightly after pushing above ~$US100/lb. The Senegalese political situation is a bit tense right now, but this hasn’t affected HAR’s operations.

Read more: HAR’s RC Drill Results From Uranium Project

Mandrake Resources (ASX:MAN)

What happened this week: MAN released its lithium exploration target - it's between 1.7mt and 5.6mt of contained LCE (Lithium Carbonate Equivalent).

This lithium target news comes just two weeks after MAN announced rock chip samples that it submitted to be tested for uranium were deemed too radioactive to be handled by the assay lab.

MAN’s radioactive uranium rocks had to be sent to a better equipped lab.

We are expecting uranium grades from those samples any day now...

Anything above 1% uranium would be exceptional.

Macro theme sentiment: Lithium: improving - see above section on lithium market sentiment.

Uranium: remains strong - new domestic sources of uranium in the US will likely be well regarded, given the current spot price and recent US legislative efforts to wean off Russian uranium supply.

Read more: MAN announces 1.7M to 5.6M ton exploration target as lithium sentiment improves.

LCL Resources (ASX:LCL)

What happened this week: LCL put out trenching results from one of the three targets at Veri Veri - its nickel project in PNG.

The best result was a 14m trench sample that returned nickel grades up to 3.24%.

Macro theme sentiment: Improving, but still weak - see previous section on nickel sentiment. We note that LCL’s project in PNG is close to Indonesia, whose nickel industry is booming.

Read more: LCL Gets Nickel Grades up to 3.24% in Trenching Work

Quick Takes

NTI: Good sign: NTI’s Rett Syndrome Trial Gets Extended

EXR: EXR Preparing for a Flow Test at its QLD Gas Project

HAR: HAR’s RC Drill Results From Uranium Project

LCL: LCL Gets Nickel Grades up to 3.24% in Trenching Work

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

Have a great weekend,

Next Investors

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