The week in Small Caps: QBL cannabis move, Jervois adds Glencore experience, Cynata stem cell progress

QBL cannabis Jervois JRV Glencore Cynata CYP stem cell
WEEKLY MARKET REPORT

The Australian stock market reached multiyear highs this week with indices now trading close to levels last seen at peaks just before the global financial crisis in 2008.

The goodwill mood for large caps came largely from the banking sector while small caps enjoyed a strong week on the back of the resources sector, including one company’s blockbuster shift from miner to medical cannabis mover and shaker.

The ASX 200 was up 2.15% this week up to 6,225.2 while the small ordinaries index ticked up 0.38% to 2,890.9. Looking at performance year-to-date, these two indices are both up around 7%.

Small cap action this week

Let’s take a closer look at the action that occurred this week on the market.

Queensland Bauxite (ASX: QBL)

Queensland Bauxite stunned market analysts, investors and its own shareholders this week. The bauxite explorer is diversifying its asset portfolio by making progress not with the drill-bit, but rather, the stroke of a pen.

After several months of loitering with serious intent, the company announced a transformational company acquisition of two cannabis companies – MCL and Medcan.

The move intends to propel to the company towards commercialising the medical cannabis space with a fully licenced production facility already on the horizon for this multidimensional stock. The company plans to keep both its bauxite and growing medical cannabis ambitions going.

Despite the significant news, Queensland Bauxite shares slipped 6% this week as questions emerged regarding the company’s share issuance and selection of acquisition.

Jervois Mining (ASX: JRV)

Promising nickel-cobalt junior Jervois Mining has targeted the release of a potentially transformational mineral resource estimate next month for its 100% owned Nico-Young asset in New South Wales.

The explorer is moving through the final stages of a pre-feasibility study and also expects to receive geological interpretation of an updated drill hole database following assay results received from a drilling program earlier this year.

Final metallurgical results are expected in July with encouraging results received so far raising hopes of a strong nickel and cobalt resource. News of its explorational progress saw Jervois shares rise 26% this week.

Jervois also found time to beef up its board of directors this week with the appointment of ex-Glencore executive Peter Johnston.

From 2013 to 2015, Mr Johnston was Head of Global Nickel Assets for Glencore International AG and sat on the Glencore executive management committee.

He has held senior executive roles with Alcoa of Australia Limited and is a previous Chairman of the Minerals Council of Australia, Chairman of the Chamber of Minerals and Energy of Western Australia, Vice President of the Australian Mines and Metals Association and President of the Nickel Institute, the senior industry body in the global nickel sector.

A big hitter that could prove to be a crucial piece of the puzzle for Jervois.

Cynata Therapeutics (ASX: CYP)

Regenerative medicine company Cynata Therapeutics has partnered up with the University of New South Wales in a bid to develop a stem cell treatment for coronary artery disease.

Its progress in the biotech space has attracted the attention of the UNSW who have agreed to partner with Cynata using funding secured via the Science Industry Network Seed Fund 2018.

The stem cell company also said it may advance to a phase 2 clinical trial of a new stem cell drug if results of an initial two-stage trial continue to prove the drug’s safety and efficacy.

Furthermore, Cynata reported positive results regarding its phase 1 trial of CYP-001, developed to treat medical complications arising from bone marrow transplants.

Tando Resources (ASX: TNO)

Tando Resources received boosts on two different fronts this week, on Wednesday the company reported its internal operations were improved with the discovery of a further seven vanadium pipes that highlighted “immense potential” to grow its SPD vanadium project in South Africa.

Tando said that its field activities including visual inspections, rock chip assays and a ground magnetic survey resulted in the find, which boosts the tally of identified pipes at the project up to 12.

On the macroeconomic side, Tando also received strong fundamental tailwind from the news that ferro-vanadium prices hit all-time highs of US$35 per kilo this week.

The recent uptrend in prices persisted across the Chinese, European and US vanadium markets due to low availability and continues to support Australia’s vanadium industry including its growing batch of explorers.

Fob China vanadium prices also rose on the back of domestic tightness as the uptrend continues in the European ferro-vanadium market.

Atlas Iron (ASX: AGO)

The race for Atlas Iron continues with Australia’s richest woman now in the driver’s seat according to market analysts.

The indomitable Mrs Rinehart has taken a commanding lead in the race for the alluring junior miner by launching a fresh takeover bid of 4.2c a share and a total sum of A$390 million.

The latest news coming out from Atlas was that its board has given its approval for the company to accept the all-cash offer which trumps the previous bid by over A$100 million, made by Perth-based Mineral Resources (ASX: MIN) for A$280 million.

However, there may still be trouble ahead. Rival mining boss Andrew Forrest could frustrate her takeover plan since his company Fortescue Metals owns a 19.9% stake in Atlas.

Rhinomed (ASX: RNO)

Medical cannabis is becoming big business across the world – both in Canada and in Australia with the news that Rhinomed signed a deal that could see its nasal technology receive accelerated multilateral development and greater adoption in key markets around the world.

Rhinomed agreed a preliminary deal with the largest US-based medical cannabis operator, Columbia Care that is expected to become binding in the next 3 months.

The US giant currently holds licenses in twelve of the most populous states and territories and is therefore positioned to offer its pharmaceutical-grade cannabis-based medicines to more than half the US population over the next 2 years.

In further news, Rhinomed received initial purchase orders confirming that one of its cornerstone products – Mute – will be stocked on the shelves of over 1,100 new CVS pharmacies across the US.

Rhinomed’s Mute technology is currently stocked in approximately 100 CVS stores, so this development represents a 10-fold plus expansion of its store count and takes the US total to 9,000.

The double-whammy of good news helped Rhinomed charge its way to a 25% gain this week.

Bowen Coking Coal (ASX: BCB)

Bowen announced to the market it had confirmed the potential for high-quality coking coal from its Cooroorah project in Queensland’s Bowen Basin.

Cooroorah has been dubbed one of the Asia Pacific’s highest-grade PCI coking coal mines and results out this week corroborated its preceding reputation.

Bowen said its highly desirable coal qualities make its project one of the highest yielding metallurgical coals, which could potentially boost the project’s economics.

To add weight to its claims, an independent consulting company confirmed Bowen’s “unique” product as bearing low sulphur and phosphorus content.

Esports Mogul (ASX: ESH)

eSports is becoming ever-more popular in Australia and growing into a significant market niche on the back of populist interest in games.

Esports Mogul and Razer, one of world’s largest hardware manufacturers announced a deeper relationship that will see Razer taking a higher stake in Esports Mogul and could potentially see both companies cross-sell and promote their respective products around the world.

Esports Mogul announced a A$4.41 million capital injection with Razer becoming a “significant shareholder” after leading an oversubscribed placement. The news was positively received by investors and saw Esports Mogul shares rise by 8.7% for the week.

Esports Mogul is all about online platforms (Mogul Arena) and users, while Razer is all about hardware and gamers – a match that could make commercial sense for both eSports focused companies.

The investment is likely to make Razer the largest shareholder in Esports Mogul thereby raising the chances that the multibillion-dollar giant, who has more than 50 million users globally, will make a significant contribution to its future development over the coming years.

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