While we still have the FTSE 100 / blue chips near the top of the range, much to the chagrin of the doomsters, Conservative Government haters, Remainers, and many more, the small caps are still right in the middle of their two-year range. This is roughly 5,600 – 7,600, so at just over 6,500, are we half empty or half full? The answer, given the ongoing lack of liquidity, should be half full. Despite the lack of cash around, to be mid-range must be regarded as an achievement. In addition, there are everyday factors: when you have rising food, mortgage prices et al, why would you buy shares? Indeed, it might be correct to go so far as to say that against a backdrop of the cost of living crisis, for the minnows to be holding up is quite a result.
Of course, the financial press is not big on the small cap space, with only the Mail On Sunday really stepping up to the plate, in coming up with tips on companies which no one has heard of. The Investors Chronicle, or should it be called the Simon Thompson Chronicle (?), could be regarded as the backbone of information for the private investor, but one would venture to suggest that apart from a mark up on Friday morning, it is not quite the bible that it used to be. This is largely because the game has moved to social media, with for me the best of the online influencers being much better than those who write for publications. The rationale here is that they have been chosen organically by their peers. They also tend to be much less snooty than those who write professionally!
Looking at the highlights of the week, it seemed apparent that Arrow Exploration (AXL) has now done more than enough to deserve the re-rate through 20p that the stock has been promising for quite some time. While giving the market a predicted production run-rate can and does make a company a hostage to fortune, RCE-3 performing better than expected means that those cautious on pressing the button on AXL should have no reason to hesitate.
What was interesting from the bulletin boards, that I have to admit I try to resist looking at, was the mention of AXL and Touchstone Exploration (TXP). The company is earlier in the curve as compared to AXL, which might be more attractive to some. The news here was that Royston-1X has exceeded expected. The stock is still relatively low in its range, especially as compared to its dizzy heights back in August through 110p. TXP closed at 69.5p on Friday.
One of the reasons for not looking at the bulletin boards unless one must is the combination of rather fruity comments, brilliant insight, but also complete rubbish. Of course, Twitter can be the same. This is the reason why one is extremely careful in terms of what one says. Even so, it is almost impossible not to get trolled now and again, the old equivalent of a heckler. Ironically, it tends to be the case then when one gets trolled, normally by a bear of a stock, the troll tends to be wrong, sometimes extremely so. This week in the case of OKYO (OKYO) I pointed out an arbitrate opportunity between the U.S. listing of the stock and the UK’s. This did not go down well on Thursday, although interestingly enough, on Friday the shares rose nearly 10%.
Another stock where I was mentioned badly in dispatches was Greatland Gold (GGP). That said, I was as disappointed as everyone else when the shares fell back from 35p plus at the beginning of 2021, to recent lows near 7p. The stock was a massive pandemic winner, as were many in the small cap space, and therefore pointing the finger once the liquidity dried up is perhaps not that helpful. Of more importance is perhaps the present setup, where we have Andrew Forrest’s $60m stake in the company, announced last September. This should have been / should be a great driver for the stock.
Indeed, this kind of strategic investment is reminiscent of several we have seen in the small cap space. The best reaction of late to a small cap pulling in a chunky amount of cash has arguably been for Kodal Minerals (KOD). But we have also seen equivalent deals at Cora (CORA), Hummingbird (HUM), and Emmerson (EML), without the same fireworks, so far.
Perhaps in such situations cautious investors are waiting on the company in question getting into production. This is something which for instance, Tirupati Graphite (TGR) has flagged, with analogous positions at Marula (MARU) and Contango (CGO), where we are on tenterhooks for “the end of the current quarter.”
Finally, it is worth mentioning one of the more off the radar mining stocks (in Daily Mail fashion). That said Thor Explorations (THX) probably should not be as obscure a name as it is currently. In fact, the shares have managed a small rise to 17.25p in the week after announcing it has found high-grade gold intersects near the Segilola mine in Nigeria. The shares were trading in the low 20p’s a couple of years back before all the progress made since.
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