The week in Small Caps: Scout locks in Stanley Black & Decker deal, AVZ maiden resource, Winchester pursues farm-outs
WEEKLY MARKET REPORT
Apple finally became the world’s first trillion dollar company but even that achievement failed to stimulate a recovery on the Australian Securities Exchange which slipped a tiny six points for the week.
The surge in Apple shares did serve a purpose by pushing up the price of US technology shares with shares like Xero (ASX: XRO) up 4 per cent to $44.72 and Appen (ASX: APX) up 6.5% to $11.57.
But in the end not even a few technology minnows could counteract the big Australian banks that undid those gains, with the sector dropping after the Productivity Commission ripped into lenders for issuing similar products, using temporary benefits as a misleading marketing lure and ripping off loyal customers.
Banks undo the technology advantage
Commonwealth Bank (ASX: CBA) shares fell the most, down 1.2% to $72.83, Westpac (ASX: WBC) shares were down 1% to $28.91, National Australia Bank (ASX: NAB) lost 0.6% to $27.64 and ANZ (ASX: ANZ) shares lost 0.9% to $28.64.
That meant the banking sector had shed 2 per cent for the week, with round five of Royal Commission hearings next week having the potential to cause further damage.
Miners even worse than banks
Miners fared even worse with the sector recording a loss of 2.4%, with BHP (ASX: BHP) down 1.6% to $33.38 and former stablemate South32 (ASX: S32) down 2.6% to $3.43 while Rio Tinto (ASX: RIO) lost 1.4% to $76.54.
The damage wasn’t confined to the big names with Orocobre (ASX: ORE) down 11.7% at $4.27 and Independence Group ASX: IGO) dropping 10.9% to $4.37.
The themes that hit miners were familiar with renewed trade worries between the US and China hitting commodity producers and a strengthening US dollar added another hurdle for the sector.
Telcos and energy rare positives
There were some positives for Australian investor with telecoms up 2.1% over the week as Telstra (ASX: TLS) recovered slightly and energy stocks were also 1.1% higher.
Credit Corp Group (ASX: CCP) had a great week, up almost jumping almost 19% over the week to $22.45 while global testing, inspection and certification company ALS (ASX: ALQ) lifted 12.2% to $8.62.
Small cap stock action
Small caps followed the ASX 200 and All Ords into the red this week, with the Small Cap index closing out Friday at 2,840.1 – down 0.91% on the previous Friday’s finish.
The ASX 200 ended the week at 6,234.8, while the All Ords dipped to 6,326.4 – declines of 1.04% and 1.02%, respectively.
Despite the small cap index’s slight slump, several small caps enjoyed some positive news this week.
Scout Security (ASX: SCT)
Scout Security fared well this week on news it had locked-in a partnership licence deal with US-based Stanley Black & Decker (NYSE: SWK).
Under the deal, Stanley will pay Scout a A$408,000 for the right to deploy Scout’s software platform and hardware suite across its brands and security businesses world-wide.
“Our teams have spent a fair amount of time together at this point and both companies share a common vision for where the security space is headed,” Scout co-founder and chief executive officer Dan Roberts said of his rationale for the partnership.
“Now, we have the chance to take that interest and vision to the next level by joining forces,” he added.
Scout’s share price rocketed more than 20% when the news was reported and continued to gain traction to end Friday at A$0.295 up 23% on the previous day, finishing 68.6% up for the week.
VEEM (ASX: VEE)
Marine technology company VEEM reported it has executed five separate sales agreements in recent months for its gyrostabilisers.
Four customers arising out of the Netherlands and one from France have inked separate deals to purchase VEEMS’ heavy-duty and high-tech gyrostabilisers, which almost eliminate the rolling motion of vessels on waves.
The units have been delivered to two ship yards already, with the remainder to be sent between now and late next year.
VEEM managing director Mark Miocevich said the sales are a “game changer” for the company and for the global marine stabilisation market.
Bellevue Gold (ASX: BGL)
Formerly known as Draig Resources, Bellevue Gold debuted its maiden resource for its namesake gold project in WA.
The maiden resource totals 1.9Mt grading 8.2g/t gold for 500,000oz of the precious metal, with Bellevue claiming it is one of Australia’s highest-grade new gold discoveries.
Around 90% of the resource extends from surface to 450m.
Further drilling is underway to include other gold targets within the resource.
Fatfish Internet Group (ASX: FFG) and iCandy Interactive (ASX: ICI)
Fatfish Internet Group entered a definitive agreement to acquire a 3% stake in eSports.com this week.
The 3% stake is in exchange for 45.6 million of its shares in iCandy Interactive.
Under the deal, eSports will then simultaneously secure 16.5 million new shares in iCandy for A$1.32 million.
Once eSports has secured all the iCandy shares, its interest in the company will be almost 20%.
The three companies anticipate synergies from the deal.
BlackEarth Minerals (ASX: BEM)
BlackEarth Minerals intersected more thick, high-grade graphite during drilling at its Maniry project in Madagascar, ahead of a maiden resource for the project.
The maiden resource will be based on the project’s primary Razafy deposit, with these latest intersections demonstrating the deposit’s growth potential.
Notable intersections included 35.7m at 7.6% total graphitic carbon (TGC), 43m at 7.3% TGC and 26.95m at 7.5% TGC.
The results were the final assays from a 65-hole drilling campaign that was carried out at the project.
Great Boulder Resources (ASX: GBR)
Great Boulder Resources has intersected “extensive” massive sulphide mineralisation at its Eastern Mafic complex target within the Mt Venn project in WA.
The company drilled 15-holes and uncovered sulphide mineralisation at five anomalies, which were identified from airborne and ground electromagnetic surveys.
Great Boulder has intersected mineralisation over about 5km of strike, and claims it has identified a “substantial magmatic sulphide system”.
Previous drilling at the project’s Mt Venn complex returned 44m at 0.5% copper, 0.2% nickel and 0.06% cobalt from 153m downhole, 21m at 0.6% copper, 0.2% nickel and 0.06% cobalt from 30m downhole, and 9.5m at 1% copper, 0.1% nickel and 0.02% cobalt from 178m downhole.
AVZ Minerals (ASX: AVZ)
It was big news this week for AVZ Minerals after it released its much-anticipated maiden resource for its flagship Manono project in the Democratic Republic of Congo.
According to the company, the maiden resource confirms Manono as the “world’s largest lithium deposit”.
The initial resource is based on the Roche Dure pegmatite and totals 259.9Mt at 1.63% lithium for 4.25Mt of contained lithium oxide.
AVZ managing director Nigel Ferguson said the company will now “fast-track” its feasibility study, with the view to advancing into production “as quickly as possible”, and key elements of the work are underway.
Winchester Energy (ASX: WEL)
Winchester Energy is looking for a partner to farm-in to its White Hat Ranch oilfield permits in Texas to help with a refocussed drilling campaign, which Winchester hopes to begin before the end of the September quarter.
The company has shortlisted four prospects for drilling within its White Hate Ranch leases.
“The planned farm-out drilling effort with drilling success will provide the opportunity to substantially increase oil production from Winchester’s existing acreage,” the company stated.
During the June quarter, Winchester successfully encountered hydrocarbon shows from its drilling campaign at the White Hat 39#1 well.
Last month, Winchester placed the well on pump and reported up to 200 barrels of fluid per day initially.
However, in the weeks following the oil element began to decline to trace levels.
Winchester shares were the biggest gainers on the ASX, closing the week up 105.9%.
Bryah Resources (ASX: BYH)
Bryah Resources will soon begin a maiden drilling campaign targeting copper and gold mineralisation at its Bryah Basin project, after the WA Government gave the go ahead and approved the rebate under the state’s exploration incentive scheme.
As part of the drilling program, Bryah will drill 24 holes for 4,800m across the Aquarius prospect including the Jupiter and Mars targets.
Bryah is also firming up the manganese potential at the project, with drilling to begin after all necessary permits have been received.
While awaiting its permits, Bryah will continue surveying and taking samples from the existing manganese stockpiles for evaluation and ore sorting.
Empire Resources (ASX: ERL)
Empire Resources reported its year-to-date unaudited revenue from mining at its Penny’s Find gold operation was A$31 million.
During the June quarter, Empire recovered 5,620oz of gold, which was sold for A$9.8 million – advancing its year-to-date revenue to exceed the feasibility forecast of A$29.6 million by 5%.
Empire is looking to move Penny’s Find underground and has developed and underground resource of 248,000t grading 7.04g/t gold for 56,000oz.
However, its unlisted former joint venture partner Brimstone Resource refused to fund its share of the campaign or sign permit applications.
As a result of the situation and previous legal proceedings, Empire moved to take action against Brimstone and terminated the joint venture and started efforts to secure owed funds.
Liontown Resources (ASX: LTR)
Liontown Resources joined other small caps in releasing a maiden resource this week, with Liontown’s maiden estimate covering the Cambridge vanadium deposit within the company’s Toolebuc project.
The maiden resource totals 84Mt at 0.30% vanadium. Liontown believes the shallow resource is amenable to a low-cost open pit mining operation.
With mineralisation at the Cambridge deposit remaining open, Liontown has calculated an exploration target of up to 110Mt grading 0.32% vanadium in the adjacent area.
The company has planned additional drilling to update the resource, with metallurgical test work also scheduled.
The week ahead
Two big things will dominates the week ahead – Tuesday’s interest rate decision by the Reserve Bank Board and the continuation of the profit results season for Australian companies.
Some of the bigger companies reporting this week include Transurban Group (ASX: TCL), under fire fund manager IOOF Holdings (ASX: IFL), Tabcorp Holdings (ASX: TAH), another under fire fund manager/insurer AMP (ASX: AMP), Suncorp Group (ASX: SUN), AGL Energy (ASX: AGL) and Mirvac Group (ASX: MGR).
Investors will also keep a weather eye out for housing and lending finance data and also inflation figures in the US and China, plus the sensitive Chinese international trade data on exports and imports.