The week in Small Caps: Bubs Australia’s China expansion, AdAlta progresses battle with fibrosis, TerraCom on hot coal run

Bubs Australia China AdAlta fibrosis TerraCom coal
WEEKLY MARKET REPORT

Australian stock indices did well across the board this week with both the larger ASX 200 and small ordinaries indices making healthy gains.

The ASX 200 was marginally up to 6,045 and maintained its seemingly unassailable 6,000 support level.

Meanwhile, the small cap ordinaries index continued its climb that has seen the index add 22% over the past year with a further 1.17% added this past week to close at 2,853.

The small cap index is pushing up towards level last seen in 2011 with upbeat demand in resource niches such as coal and lithium helping the likes of TerraCom and Six Sigma Metals to make strong gains this week.

Outside of Australia’s traditional resource safe haven, there was other notable news out this week regarding the world’s fastest-growing sport coming to Melbourne for the first time in history in a few months time.

With eSports companies like Esports Mogul riding the wave of online gaming growth.

Small cap action this week

Let’s taker a closer look at some of the more newsworthy stocks from this week.

Bubs Australia (ASX: BUB)

Bubs Australia is moving through the gears on its self-acclaimed “pathway to provenance,” but its share price finished largely unchanged this week.

This week saw Bubs signing a lucrative supply agreement with a leading Chinese distributor as the company gradually moves towards becoming Australia’s only vertically integrated producer of goat milk infant formula, and the largest producer of goat dairy products in the country.

Bubs announced purchase orders valued at $17 million for the 2019 financial year and increasing up to $37 million in 2021. The company is also on the hunt for its very own business-critical China Food and Drug Administration (CFDA) registration.

Its commercial aspirations in China don’t stop there.

Buoyed by strong sales growth, Bubs is also expanding its reach with an additional 80,000 stores, to sure up its production capacity and to obtain greater access to the Chinese market.

Last but not least, Bubs Australia is expanding its e-commerce reach with the news that it signed a merchant service agreement with Alibaba. Bubs has moved quickly with a flagship online store now launched on Tmall Global, currently the largest business-to-consumer retail platform in Asia.

AdAlta (ASX: 1AD)

AdAlta secured critically important manufacturing agreements for its lead anti-fibrosis AD-214 drug this week, thereby taking a step closer to commencing clinical trials of its fibrosis drug.

Currently, as much as 45% of deaths in the developed world are caused by fibrosis and there is no satisfactory therapeutic approach to treating the disease.

AdAlta is developing a potentially effective means to combat the disease and has obtained orphan drug status from the FDA in the US for its AD-214 drug.

AD-214 is being developed to help people with a range of fibrotic diseases prevalent in other parts of the body such as the eye, kidney, liver and skin.

The stock had a great news week but its shares remained at $0.35 per share on Friday afternoon after opening at the same level of Monday.

Axiom Mining (ASX: AVQ)

Cobalt and nickel are on the menu for Axiom Mining after the explorer received approval for two keenly-awaited mineral rights applications at its flagship Isabel nickel project in the Solomon Islands.

The grants mean that Axiom can potentially make exploration progress and move towards becoming a nickel producer within a low-cost region that will likely generate strong operating margins – although there is much more work to do. Its shares slipped from around $0.21 to $0.16 this week.

Axiom said that it expects its prospecting licences to soon become mining leases and has confirmed that additional applications for minerals rights are pending.

In the meantime, nickel prices are creeping higher, now at around $15,000 per tonne which only goes to ease Axiom’s development path in the Solomon Islands.

The explorer will need to find somewhere in the region of $10 million to get a mine up and running and is also running a lot lighter with the recent Sumitomo court case firmly in the rear-view mirror.

TerraCom (ASX: TER)

The reinvigorated coal market is helping TerraCom improve production rates at its Blair Athol coal mine in Queensland.

The miner reported said it secured sales for 520,000 tonnes at a forecast average price of US$92 per tonne this week as well as the discovery of a thick coal deposit close to its Baruun Noyon Uul (BNU) coking coal mine in Mongolia.

The news helped TerraCom to post a 20% gain this week.

The market for Australian thermal coal has shown considerable strength over the past two months, with a growing trend of buyers wishing to secure low total sulphur bituminous coal such as the product from Blair Athol.

EHR Resources (ASX: EHX)

EHR Resources ticked up this week following the all clear to start explorative drilling at its flagship La Victoria project in Peru.

EHR said its 4,000-metre diamond drilling campaign will test the Rufina and San Markito deposits where mineralisation has previously been identified.

It’s still early days for the gold junior that’s aiming to earn itself a 25% stake in La Victoria from Eloro Resources, its Canadian joint-venture partner.

Equus Mining (ASX: EQE)

Equus Mining delivered its most significant intercept to-date at its Los Domos silver, lead, zinc and gold project in Chile this week.

More specifically, Equus reported results measuring 44 metres at 5.37 grams per tonne gold and one assay result grading 15g/t gold. Equus also said that the average weighted grade from its most recent drill holes was 5.39g/t gold equivalent.

The results are reminiscent of other well-known large epithermal deposits such as the La Blanca epithermal vein deposit at the Palmarejo project in Mexico – and sets up a promising next few months as the explorer analyses its exploration results further.

StemCell United (ASX: SCU)

StemCell received some indirectly beneficial news via its close working partner Yunnan Hua Fang Industrial Hemp – news that greatly improves its chances of commercialising the Chinese cosmetics market, using its environmentally-friendly breakthrough plant stem cell biotechnology.

China’s skincare market is one of the world’s largest cosmetic markets and the use of cannabis stem cell extraction for beauty products is expected to provide StemCell compelling growth opportunities.

Yunnan Hua was granted an industrial hemp licence which permits StemCell to engage in planting, processing and selling of industrial hemp related products in China. StemCell’s proprietary extracts are currently in high demand and widely used in many different products, including medical, healthcare and beauty products.

The company’s shares reflected the goodwill sentiment amongst investors with its shares spiking as high as $0.04 per share on Thursday, before falling back to $0.029 by Friday’s close, around 45% higher on the week.

Six Sigma Metals (ASX: SI6)

Battery metals aspirational Six Sigma Metals has the bit between its teeth in Zimbabwe.

After securing the rights to earn 80% in two highly prospective lithium and vanadium-titanium projects in Zimbabwe last month, the lithium explorer has announced that it has discovered samples grading as high as 3.13% lithium at its Shamva lithium project in Zimbabwe’s north, as part of initial exploration.

A total of 240 rock chip samples were collected across Shamva’s Bonnyvale pegmatite, with 61 samples grading higher than 2% lithium.

At its other high-profile Chuatsa project, Six Sigma confirmed that upon completing due diligence, it plans to fast-track exploration to take advantage of the rising vanadium market, which is powered by the emerging vanadium flow redox battery market.

Six Sigma finished the week 27% higher at $0.014 per share at Friday’s close.

Tando Resources (ASX: TNO)

Metallurgical testing on its vanadium pipe samples from Tando Resources’ SPD project in South Africa has yielded high-grade assay results that could potentially pave the way for the resources junior to generate “significant upside”.

Test work was undertaken on samples which yielded a concentrate assaying 2.03% vanadium and 13.3% titanium – considered to be sufficiently high-grade to be amenable to simple processing methods, which means the mineralisation could be sold as a direct shipping ore to end-users without further treatment.

The next stage of test work will investigate the concentrate’s responsiveness to leaching via two different methods to achieve a battery grade product. Meanwhile, on the exploration front, Tando has lined up a ground magnetic survey across the project and anticipates discovering more pipes that may be hidden under cover.

Tando’s shares ticked up 9% over the course of the week.

Esports Mogul (ASX: ESH)

Esports Mogul launched the Vietnamese and Thai versions of its proprietary Mogul Arena tournament gaming platform with further Spanish and Portuguese updates also coming around the corner.

With gaming and eSports taking off globally (especially in developing countries where spare capacity is much higher) Esports Mogul intends to include any and all gamers to the thriving gaming community.

The breath-taking rate of growth across the gaming niche including gaming, eSports and social gaming has led to the Victorian government helping to organise Melbourne’s first ever eSports tournament dubbed the ‘Melbourne eSports Open’.

In September this year, tens of thousands of video game aficionados will descend on the Rod Laver Arena, Margaret Court Arena and the Melbourne Park Function Centre to watch the eSports tournament that is expected to attract the world’s best gamers and thousands of visitors from across Victoria and overseas.

The prizes professional gamers now play for reach into millions of dollars and rival the winnings earned by tennis players – so the event is expected to have a fair amount of pomp and revelry when the world’s fastest growing sport rolls into Melbourne later this year.

Filip has written in both Australia and abroad during his career, covering everything from the global economy, politics and geopolitical issues to commodities and small cap stocks on the ASX.