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The thematics we are investing in right now

Published 11-SEP-2021 12:00 P.M.


12 minute read

It's been a bit quieter from us than usual this week as we have been busy finishing our financials and tax statements for the last FY - everyone’s favourite yearly task.

Readers who have been with us for a few years know that our best gains have come from identifying high conviction investment themes early, taking positions in quality companies with good management and then patiently waiting for the market to catch on.

Sometimes it doesn’t happen. Sometimes it takes many months. Other times it can take years... we are happy to wait.

Our runaway success has been our early investments in battery metals. Here is our September 2020 ebook “an investor's guide to battery metals” from back when nobody cared about battery metals and none of the major car makers had announced electric vehicle strategies. VUL was 87¢ (now ~$16) and EMN was around 10¢ (now 60¢).

Other broad investment themes we believe in for the next decade include the commodities super cycle, cybersecurity, health tech, green energy (but also traditional energy which we don’t think will go away as quickly as expected), and we have some cherry picked companies that we think will do well over time.

We also mix in some early stage, high risk metals exploration to keep things exciting during the current hot commodities cycle (careful, these are risky).

We want all our investments to provide quarterly environmental, social and governance (ESG) disclosures, and to take ESG seriously. We believe ESG will become mandatory in the next few years and want our companies to have a head start.

Here is a short summary on why we believe in each of our key investment themes and the specific companies we have invested in for that theme.

Click on the company name to find our reasons for investing, company milestones (achieved and expected), and a list of all our past commentary on that company.

Battery metals - As the world switches to green energy and battery powered transport, battery metals supply is going to need to catch up and fast. After COVID, countries also realised how fickle global supply chains are, and battery metal demand will further increase as each country rushes to secure their own supply. We went hard on battery metals before they were cool, and this has been where we have had some good success:

Green Energy - Clean energy and green hydrogen have been increasingly popping up in 2021, we think it’s still early in this theme and it has a while to play out yet:

  • Province Resources (ASX:PRL) - early stage green hydrogen and clean energy project (Western Australia)
  • GTi Resources (ASX:GTR) - early stage exploration for uranium (USA). We have been invested for over a year now, waiting for the market to cotton on to uranium — it looks like it finally has over the last two weeks...
  • Minbos Resources (ASX:MNB) - main game is food security but quietly announced a clean energy powered green ammonia project a few months ago - also see below in food security thematic
  • Elixir Energy (ASX:EXR) - main game is natural gas exploration but announced green energy and hydrogen projects a few months ago - also see below in energy thematic

Technology: Health and Cybersecurity - COVID lock downs have turbocharged adoption of technology in industries that have traditionally been slow adopters. We are particularly interested in health (telehealth and med tech) as humans become more aware of the importance of health, and in cyber security as geopolitical tensions drive sovereign cyber attacks between nations.

  • Whitehawk (ASX:WHK) - growth stage - US based cybersecurity tech with customers in US federal government, Defense and large enterprises
  • Oneview Healthcare (ASX:ONE) - growth stage - Health tech and telehealth to modernise patient experience in hospitals
  • Advanced Human Imaging (ASX:AHI) - early stage - smartphone-based face and body scan tech with applications in health, fitness and medical sectors

Precious metals - Gold and silver have been coveted for centuries and usually do well during periods of high inflation, global financial system concerns, or times of geopolitical instability. While these are pre-production investments they should perform if the gold and silver price runs (and if they have exploration success):

Energy - The world is moving to electrification but we don’t think traditional energy is going away anytime soon and will still form part of the energy mix for a long time to come. We believe general underinvestment in this sector will cause a supply crunch over the next few years:

Early stage metals exploration (commodities supercycle) - We have always loved investing in the high risk, high reward opportunities of early stage metals explorers. These are risky investments with a high chance of losing, but if they DO hit, they can deliver some great returns (Note: there are some repeats here that also fall into this early stage category)

Other - Sometimes we just like a specific stock, and may add more investments in that particular theme as it unfolds.

  • Minbos Resources (ASX:MNB) - development stage phosphate (fertiliser) - food we think food security is going to be a big theme over next decade
  • Alexium International (ASX:AJX) - high performance, green chemicals - we like the team and the concept, they just need to deliver revenue growth and for the market to catch on, was slowed down by COVID
  • Creso Pharma (ASX:CPH) - growth stage medicinal cannabis and psychedelics for mental health
  • Vonex (ASX:VN8) - growth stage telco - stable revenue through acquisition, we have been following for a few years so got to know and like the company
  • Dimerix (ASX:DXB) - phase 3 trials stage biotech - we like the runway for the next 12 months for the phase 3 trials of the kidney disease treatment, and the two COVID treatment side bets

So there is our portfolio construction broken down by the investment thematics that we believe will be strong over the next 10 years.

📰 This week on Next Investors

Province Resources (ASX:PRL) has reached an early milestone in its plans to develop Australia’s first renewable energy powered green hydrogen project, the HyEnergy Green Hydrogen Project.

PRL received initial approval this week to begin activities on site, with a licence granted for a site north of Carnarvon in WA. With this first approval in hand, PRL expects to be on site within the coming weeks and can now undertake environmental and other on-ground studies.

This licence is a first but major step in getting all the approvals required for the project’s development.

📰 Key Milestone: First licence arrives for PRL’s Green Hydrogen Project

Pursuit Minerals (ASX:PUR) reported that it has completed the first two drill holes of its maiden 1,500m diamond drilling program at Phil’s Hill project where it is exploring for PGE-nickel-copper mineralisation.

While PUR didn’t score a “hole-in-one” from these first two diamond drill holes, the results suggest that there could be multiple, high conductance plates. However, surface and airborne EM techniques cannot resolve beyond a very large high conductance plate.

For that reason, PUR has decided to pause drilling — to be recommenced in two weeks — and run downhole EM (DHEM) surveys that will provide improved resolution and allow better targeting of conductors. This will ensure that the rest of its ongoing diamond drilling program will be focussed on locating the rocks that give a strong conductive response.

📰 PUR first drill results are in - More coming in a few weeks

Thomson Resources (ASX:TMZ) has now completed its acquisition of the Texas Silver Mine and is finalising the Silver Spur Mine acquisition as it aggregates the silver projects that comprise its New England Hub and Spoke Strategy.

Under the strategy, TMZ is targeting a global resource of 100Moz of silver equiv. and plans to be the largest silver resource base on the ASX.

Along with completion of the Texas Silver Mine acquisition, in the last couple of weeks TMZ has also completed initial metallurgical testwork that demonstrated strong silver and zinc output from the Silver Spur deposit, and confirmed an exploration program for its gold and tin projects.

The company chairman is now in the US presenting to potential future institutional investors, while TMZ has also applied for its shares to be quoted on the US over-the-counter market (OTCQB) to provide access for the large US retail investor market.

📰 TMZ closes in on silver production — we increased our position at 10¢

🗣️ Quick takes on key portfolio company events this week:

Creso Pharma (ASX:CPH)

CPH continues to roll out its new strategy to go it alone and list on the NASDAQ this week after it pulled out of the proposed merger with Red light Holland (both parties are still on good terms and appear to still be collaborating).

You can see their latest investor presentation here which covers the new plan in more detail.

We actually prefer CPH’s new strategy as we weren’t 100% convinced about CPH’s proposed merger when it was announced. We listed what we DID and DIDN’T like about it here back in June.

CPH is making quick steps on its plans this week announcing key additions to its management team (which is a big tick for us) - see the announcement here.

Given the favourable legislation that is rapidly evolving the US market for cannabis and psychedelics for mental health, we like CPH’s decision to go it alone and are encouraged by CPH installing a new management team that is experienced in growth and expansion...this will hopefully also be well received by the market as it plays out.

Galileo Mining (ASX:GAL)

This week GAL closed out it’s $6.5M placement at 2.6c to fund ongoing drilling and exploration for nickel at Fraser Range and drilling and exploration for palladium at Norseman.

GAL already had a fair amount of cash in the bank, but the raise saw cornerstone investments from major shareholders — the Creasy Group and IGO — which we view as validation that GAL is on the right track.

As long term investors, we consider capital raises to be part and parcel of early stage mining exploration. Although traders and short term investors may not like that the capital raise puts a damper on the share price until the placement shares are digested by the market, we focus more on the fact that GAL has the funds to continue with its project.

In our other portfolios 🧬 🦉 🏹

🏹 Catalyst Hunter

Our Catalyst Hunter copper investment, TechGen Metals Ltd (ASX:TG1) this week provided an update on exploration activities at its WA copper projects.

TG1’s has recently refocused its attention on its copper assets, which makes sense given that the copper price remains at near record highs and is forecast to see rising demand thanks to its use in rapidly growing industrial sectors including electric vehicle batteries and semiconductor wiring.

RC and diamond drilling is set to commence over the coming months at two of its three copper projects in the Ashburton Basin and we are looking forward to seeing the results. Heritage access surveys are now being planned ahead of RC and diamond drilling at both projects, which we expect should happen before the end of the year.

📰 Tiny TG1 leveraged to copper discovery - drilling soon ...

🌎 Mainstream Media:

Battery Metals / Electric Vehicles (VUL, EMN, KNI, GAL, PUR)

AFR: Investors stampede mining’s electrification frenzy

Bloomberg: Auto Shows Are Back and CEOs Have Wheeling-and-Dealing to Do

Bloomberg: BMW Orders Up $24 Billion of Batteries as EV Demand Grows

The Driven: Tesla plans to invest $8 billion into EV battery plant next to Giga Berlin

Bloomberg: BHP Strikes Exploration Deal With Jeff Bezos-Backed Data Startup

Silver (TMZ)

Bloomberg: Silver Miner in Australia Is Betting Solar Will Drive Demand

Hydrogen (PRL)

The West Australian BP eyes renewable energy hub at Kwinana

Nikkei Asia: From Hyundai to SK, top Korean companies join hands on hydrogen

Iron Ore (PFE)

AFR: A silver lining to iron ore’s big tumble

Uranium (GTR)

AFR: Uranium’s resurgence from 10 years of obscurity


AFR: Climate change ‘biggest investment opportunity since the internet’

Bloomberg: Commodity Supply Crunch to Boost Already Booming Chinese Stocks

ASIC: ‘Don’t believe the hype’: Common tactics to get you to invest in shares

AFR: How to plug into the resources supercycle

Have a great weekend,

Next Investors

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