Mineral Resource Estimate update, a speculative investment, and the high-risk end of FTSE AIM trading. Take your position.
The FTSE AIM market is not the FTSE 100.
With the UK’s premier index, the popular strategy is to buy an index tracking ETF, and then sit back and relish the passive income dividends.
In the small cap market, this strategy is rarely a good idea. The AIM market is down by 26.8% over the past five years — and yet within that time, certain specific companies have seen genuinely extraordinary returns. For example, Novacyt shares rose by 18,000% between October 2019 and October 2020, spurred on by pandemic-era demand.
In a depressed market — albeit one showing signs of green shoots — the chance of picking an AIM stock which can deliver outsized returns is larger. Add in the fact that interest rates may now be at their peak, and adding some risk assets into your portfolio may be a good idea.
With the standard caveats surrounding financial resilience and diversification.
Three AIM shares to watch this week
1. Greatland Gold
Greatland Gold is on the verge of updating investors regarding the results of more than 80,000 metres of drilling that’s been ongoing since March 2022. For context, flagship Havieron’s current Mineral Resource Estimate stands at 6.5Moz @ 2.2g/t AuEq, but this was already more than 50% of the original maiden resource estimate from December 2020.
This updated MRE estimate has been delayed for some time, but significant financial confidence in Greatland can be found in both its banking syndicate and backer Wyloo, which suggests the upgrade will be significant — and perhaps might even start with a 9.
Analysts — and likely even Newmont itself — remain conflicted over whether the new titanic hybrid will want to retain Telfer and Havieron. Positive comments made by management about the jurisdiction last week point one way, but the fact remains that the value proposition at the current MRE simply does not meet Newmont’s objective criteria.
Of course, there’s always a little fudging room. And a huge MRE update will drastically change the economics.
2. ECR Minerals
Beaten down AIM shares are often where the best value can be found — and if nothing else, ECR is beaten down, even if it remains a higher risk proposition. The company’s shares surged in mid-September when it announced that Nick Tulloch was joining as Managing Director and Mike Whitlow as Chief Operating Officer — though have since fallen back to what appears to be an attractive entry point.
It’s worth noting that ECR also raised £580,000 at the time to fund operations across its Australian assets — where good news seemed to have stalled for much of 2023.
However, there are some green shoots to consider, including some decent results at Lolworth — where ECR discovered gold bearing quartz veins that Whitlow described as being ‘cause for optimism’ even if it is ‘still early days.’
Some perspective is important here; ECR has a market capitalisation of just £3.5 million. This is unlikely to be attractive as a main portfolio share like Greatland — but a small stake could be rewarding.
3. Horizonte Minerals
If Greatland is an exceptional long-term opportunity and ECR Minerals is a speculative investment, then Horizonte is probably closer to a gamble — but a gamble with a decent risk/reward ratio.
Horizonte Minerals told investors that capex costs at its flagship Araguaia nickel mine in South America would need to increase by at least 35% in early October. Predictably, the share price has fallen sharply, though the depth of the fall is perhaps an overreaction.
Reta Engenharia has been contracted to calculate exact excess costs; but in timeline terms, the company is expecting a six month delay to production to H2 2024. How these costs are met is the key question and will determine whether shareholders see a huge recovery or get almost completely wiped out.
The review reports back in ‘mid Q4’ — essentially any day now — and the smaller the number is, the better the chances are that shareholders get to enjoy something of a recovery. Those who bought at the top are unlikely to recover everything, but in the context of the size and life of this particular asset, this may yet prove to be a hiccup on the way to production.
Or not. AIM shares are not Phoenix Group.
You can trade Greatland Gold, ECR Minerals and Horizonte Minerals using our partner Spreadex — use the link below!
