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Australia bets big on Hydrogen at COP26, investment in companies that solve problems

Published 20-NOV-2021 10:23 A.M.


10 minute read

High-stakes stuff this week. The Melbourne Cup seems a distant memory as market risks and probabilities take centre stage once more.

Yesterday, Blackstone sweetened its bid for Packer’s tormented punting palace (Crown).

Meanwhile in the US, Jerome Powell is hedging his bets by winding back the money printer ever so slightly as inflation becomes a political football.

Powell is facing the most delicate of balancing acts. Risk vs reward, strong economy vs full blown inflationary crisis.

Perhaps the ultimate gamble this week though, is the punt governments are making to avoid a climate disaster.

With COP26 concluded and Morrison, Turnbull and Twiggy’s feather preening finished, everyone and their dog is having their say on what tech can get this country to zero by 2050.

Australia is betting big on hydrogen energy to cut emissions quickly.

And we’re going to need a heap of materials and commodities to beat back the emissions menace.

If you’ve followed our investments closely - or even if you are new, we think you’ll find that we have positions across all the macro themes just mentioned.

Think of these positions as an investment in fixing problems.

Problem: inflation. Solution: gold stocks.

Problem: emissions. Solution: “green” commodities (particularly ones with exposure to technology/climate mitigation upside)

Problem: inefficient healthcare systems. Solution: companies like Oneview Healthcare (ONE) which recently completed a capital raise.

Some cynics may think small-caps are pure gambling.

We disagree.

Yes, probabilities are involved and any small cap stock is a high risk investment.

But with careful due diligence processes, an eye for emerging macro themes and a deep understanding of a business’s expected milestones... we believe it is possible to increase the probabilities of a positive long term investment outcome.

No guarantees of course, in the small cap markets only invest what you can afford to lose and have an investment strategy with clear outcomes in place.

We especially like the “sustainable, raw materials required to tackle climate change” macro theme.

Our Wise Owl Pick of The Year for 2021, Evolution Energy Minerals (ASX:EV1) had its debut on the ASX this week, and we think the probabilities and risk reward ratio fit what we look for in a long term investment.

A later stage project, with a JORC resource in place, committed to ESG, aiming to deliver a solution to graphite demand shortfall for electric vehicle batteries, delivering a material needed to help decarbonise our atmosphere.

You can read our EV1 Wise Owl Pick of the Year Initiation note here.

It all added up for us.

📰 This week on Next Investors

We started the week off with news that OneView (ASX:ONE) had raised $20M via a well-supported placement at 27c & has plans to raise a further $3M via a share purchase plan at the same price.

ONE has early penetration in the lucrative US healthcare market and we think this raise is the precursor for the aggressive “land grab” growth push.

With this cash in the bank ONE can now accelerate sales and adoption, specifically in the US healthcare market.

📰 Read more :ONE goes for US market share ‘Land Grab’ with $20M Capital Raise

Galileo Mining (ASX:GAL) received what was a really pleasant surprise from it’s air-core drilling program over it’s Norseman nickel/Palladium project.

GAL is in the middle of a 10,000m Aircore drilling program (which is generally used during target generation work) and managed to hit some “massive sulphide” intercepts at shallow depths. It's not everyday you see these type intercepts in Aircore drilling programs.

“Massive sulphides” are the types of rock that host precious metals, & with the intercept being on the margin of a large ulta-mafic intrusion, it looks like GAL are looking in the right places.

📰 Read more :GAL hits unexpected massive sulphides in shallow aircore drill program

On Thursday Province Resources (ASX:PRL) received news that the WA Government is proposing changes to laws that will help provide a clear pathway for PRL (and other green energy projects) to secure the necessary approvals for development.

We think this substantially de-risks the permitting element of PRL’s project, and will likely be looked favourably upon by potential financing partner Total Eren as the two parties progress the Scoping Study that was announced in April 2021.

This announcement by the WA Government provides an added measure of legal certainty necessary for PRL to move forward with the project

📰 Read more : New Laws Proposed in WA Unlocks Green Hydrogen Project for PRL

🗣️ Quick takes on key portfolio company events this week:

Vulcan Energy (ASX:VUL)

On Friday VUL announced that they had agreed to acquire two electric drill rigs which are suitable for drilling deep geothermal wells.

These rigs are hard to come by and are important for VUL who are executing on a Zero-carbon emissions strategy at their lithium project. We like that these rigs are being purchased outright given they will be extremely hard to secure in the future as European explorers turn their operations increasingly green.

Next we want to see VUL’s demonstration plant operating, the definitive feasibility study and German listing.

Titan Minerals (ASX:TTM)

TTM has been busy drilling their potentially giant Ecuador gold project: Dynasty.

Dynasty already hosts a 2.1 million ounce gold foreign resource, and the current 12,000m drilling campaign is attempting to extend the resource base whilst bringing it upto JORC Standards.

Earlier this week, TTM announced the second batch of assay data from Dynasty, led by a further 11 diamond drill hole results at the main Cerro Verde prospect. All but one hole returned significant intercepts of mineralisation, the best three being:

  • 5.49m @ 5.33g/t gold with 259g/t silver from 58.3m in CVD023
  • 9.22m @ 2.46g/t gold with 11g/t silver from 169.1m in CVD022
  • 3.12m @ 4.57g/t gold with 10g/t silver from 154.97m in CVD027

What stood out to us was the silver shown in both the diamond drill and trenching results. The Dynasty project has always been about Gold up until now - if more silver is found in the results .

Creso Pharma (ASX:CPH)

This week was eventful for CPH. While we really like the medicinal cannabis and psychedelics for mental health space, we have always been a bit cautious with our CPH investment and have re-iterated that for the company to become a portfolio addition it would first need to meet certain key milestones.

The main milestones are to appoint an experienced CEO, and for the company to deliver and clear long term strategy and narrative so investors can better understand the progress of the story.

There was some negative media around CPH this week, but the company announced to the market that they are not aware of the company being investigated so we will be watching closely to see what comes from all of this.

Next we want to seean experienced CEO appointed, clear company strategy to follow and clarity on the recent media.

Advanced Human Imaging (ASX:AHI)

To end the week AHI announced that the pricing for it’s US IPO had been confirmed at US$5.25/ADS. ADS stands for American Depositary Shares which for AHI represents equivalent ownership in 7 fully paid ordinary shares. In a nutshell, for every 1 ADS owned = 7 AHI shares. Using today’s exchange rate of 1USD=1.38AUD it looks like the IPO has been priced at $1.035/Share (ASX-listed AHI shares).

The NASDAQ listing is one of the key milestones we wanted to see AHI deliver after several delays.

Next we want to see the US listing finalised & for AHI to detail how the funds will be deployed. Also still waiting for those Tinjoy revenue numbers...

In our other portfolios 🧬 🦉 🏹

🦉 Wise-Owl

Evolution Energy Minerals (ASX:EV1)

This week Wise Owl announced its first ever Pick of the Year - Evolution Energy Minerals (ASX:EV1).

EV1 is aiming to develop it’s sustainable, ESG friendly & advanced stage graphite project in Tanzania and on Tuesday it listed on the ASX today after raising $22M in an oversubscribed IPO.

The IPO was cornerstoned by an ESG fund (who now own 25% of EV1), and is aiming to have one of the most ESG integrated mining projects on the ASX. During the Due-Diligence phase we were so impressed with this company that we decided to make this stock our Pick of the Year.

In our initial coverage note we listed the top 10 key reasons for making our investment & why we think EV1 is perfectly positioned to take advantage of the growing interest in graphite exploration/production companies.

📰 Read the full breakdown of our 10 key reasons:Introducing our Pick of the Year

🏹 Catalyst Hunter

Grand Gulf Energy (ASX:GGE)

GGE updated the market with an announcement showing it had managed to expanded its acreage by 16% - now commanding a 27,303 acre lease holding in a specific part of the US dubbed “the Saudi Arabia of Helium”

This increase in the project size was made ahead of announcing a maiden prospective resource estimate which the company expects to update the market on in the near term.

All of this was done before the main event for GGE - drilling with its first exploration well on this project - scheduled for early 2022.

📰 Read the full breakdown:GGE Expands USA Helium Ground - Drilling Next Year

Latin Resources (ASX:LRS)

Earlier in the week Latin Resources (ASX:LRS) released news that they teamed up with a former CSIRO Chief Research Scientist to do some R&D projects that will test to if LRS can use its halloysite to develop technology that will reduce methane emissions.

LRS happens to have one of the largest kaolin / halloysite deposits in Australia & it turns out, halloysite and kaolin clay minerals could be used to develop novel methane emission reduction technologies.

While still an early stage R&D project with unclear outcomes, we always rate ESG friendly companies higher than the rest, and LRS taking steps to make meaningful contributions to the reduction of methane emissions is something we view positively.

📰 Read the full breakdown:LRS Aims to Cut Cow Methane With Halloysite

🌎 Mainstream Media:

Reader submission of the week - commodities shortage for climate commitment:

Thanks to our reader Mohammed for sending us this article from the Financial Times about the upcoming struggle Europe will experience in securing supply of the raw materials it needs to deliver on its commitments to decarbonisation - one of our key investment themes is starting to trickle in to global mainstream media:

The EU’s looming mismatch between climate ambition and minerals supply (Financial Times)

(everyone: please reply to any of our emails if you find interesting articles or content you want to share, or if you have any feedback on our service)

US Inflation - Gold (TTM, LCL, TMR, TMZ)
Evolution pays $1b for Glencore mine(AFR)
Powell Flags Rising Inflation Risk While Playing Down Rate (Bloomberg)
If Biden picks Brainard over Powell for Fed chief, expect an immediate market impact (CNBC)

Iron Ore- (PFE, IRD)
Why Chris Ellison says iron ore is down, but not out(AFR)

Lithium (VUL, EMH, LRS)
SQM expects lithium prices to jump 50% before year-end (
UBS conference: EVs face lithium bottleneck on rising demand (The Australian)

Hydrogen Energy (PRL, EXR)
Bob Brown targets hydrogen revolution (AFR)
Hydrogen in the gas mix in NSW first (AFR)
WA’s land tenure laws set to be overhauled to unlock millions of hectares for renewable hydrogen projects(Thewest)

Oil & Gas (IVZ, 88E)
US auctions off oil and gas drilling leases in Gulf of Mexico after climate talks(Guardian)
Oil prices stabilise after wild swings on prospect of crude stockpiles release (Reuters)

Have a great weekend,

Next Investors

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