Before allocating into a micro-cap stock, an investor must first build conviction in its potential for outsized returns.
There is no free lunch in active investing, given the undiversifiable idiosyncratic risk of holding single stocks, but a clearly delineated plan can be a decent approximation, offering seasoned investors the ability to perform due diligence, forecast the probability of success, and allocate ahead of the retail herd, which only piles into a stock after a significant run-up.
To this end, and to usher you into a well-deserved weekend, here are three micro-cap stocks that announced major news over the past week, setting themselves up to generate transformational shareholder value:
A big-name backer de-risks Zambian junior copper explorer
Midnight Sun Mining (TSXV:MMA) is exploring and developing its 506-square-kilometre Solwezi project in the Zambia-Congo Copperbelt, the second-largest copper-producing region in the world, guided by multiple opportunities for the discovery of multi-generational deposits. The company’s property is adjacent to the largest copper mine in Africa – First Quantum’s Kansanshi mine – with numerous other world-leading mining companies active in the region, including Barrick, Rio Tinto, Glencore, Ivanhoe Mines, Anglo American and KoBold Metals.
The company recently announced that global critical minerals explorer KoBold Metals – backed by Breakthrough Energy Ventures (initiated by Bill Gates), Andreessen Horowitz, T. Rowe Price and the Canadian Pension Plan Investment Board – signed an option to pay US$15 million in exploration (plus US$500,000 cash) over 4.5 years to earn a 75 per cent interest in the Dumbwa portion of the Solwezi project.
Dumbwa boasts a continuous high-grade copper-in-soil anomaly grading up to 0.73 per cent copper that extends over 20 km along strike and over 1 km in width.
Backed by KoBold’s established track record of advancing mineral exploration through artificial intelligence, including more than 60 projects across four continents, investors can look forward to Dumbwa drilling in 2024 from a considerably de-risked vantage point.
Adrian O’Brien, Midnight Sun’s director of marketing and communications, joined Stockhouse’s Brieanna McCutcheon for an interview about the option and what it means for the company.
Midnight Sun plans to continue exploring key targets in the remaining 398 square km of its Solwezi project, which are nothing to scoff at, as highlighted by 11.6 m grading 3.44 per cent copper at the polymetallic Mitu, 11.3 m of 5.71 per cent copper near surface at Kazhiba, and a continuous 5 km EM anomaly in the same stratigraphy as the Kansanshi mine at the Crunch zone.
Midnight Sun Mining stock (TSXV:MMA) last traded at C$0.26 per share. The stock is up by 21.43 per cent year-over-year and by 112.50 per cent since 2019, supported by its globally significant jurisdiction.
Click here to read Midnight Sun Mining’s latest investor presentation.
A turnaround stock in the making
AnalytixInsight (TSXV:ALY) is a data analytics and enterprise software provider, whose cloud-based platforms deliver financial content, stock trading and research solutions for banks, brokers and investors across the financial services industry. The company counts numerous world-leading institutions in its client base, including Refinitiv, Morningstar and Samsung.
After the resignation of chairman and chief executive officer Prakash Hariharan, and the subsequent hiring of Vince Kadar as chairman and Natalie Hirsch as president and CEO, AnalytixInsight has embarked on a turnaround strategy designed to create revenue and reverse shareholders’ three years of sustained losses.
The company determined that its business segment centred on the Capital Cube – an AI-driven supplier of machine-created analyst research content on 50,000 global stocks and North American ETFs – retains “competitive and defendable intellectual property,” according to a news release from earlier this month, representing a value-accretive opportunity to grow sales through new users. Market validation analysis is underway to optimally capitalize on Canadian and U.S. demand, with a new sales lead “generating immediate interest” and substantiating the product’s long-term path to licensing revenue.
The Euclides division, which is focused on field service management software, was determined to fall short of the return potential of AnalytixInsight’s other ventures, because of years of cost-revenue imbalances. Management has taken steps to streamline the business and reduce overhead, while remaining on the lookout for economical deals.
Finally, management views the company’s MarketWall division, a 49-per-cent-owned developer of fintech solutions for Italian financial institutions, as a strategic avenue for short-term opportunities between AnalytixInsight, MarketWall and Intesa SanPaolo, a bank that licensed its investment app from MarketWall in 2018 for its more than 750,000 active users.
With a clear plan in place to reinvigorate its business, management is offering shareholders, current and prospective, a scorecard by which to measure its future performance, and in so doing is putting its livelihood on the line, a trait every team behind our portfolio holdings should aspire to.
AnalytixInsight stock (TSXV:ALY) last traded at C$0.06 per share. The stock is down by 78.57 per cent year-over-year and by 84.62 per cent since 2019.
Continue your research by reading AnalytixInsight’s latest investor presentation and watching Hirsch’s interview with Brieanna McCutcheon about the company’s outlook.
Outsized and unacknowledged upside
Our final micro-cap stock pick is Usha Resources (TSXV:USHA), an acquirer and explorer of drill-ready battery metal properties. The company’s portfolio of scalable and target-rich projects includes:
- Jackpot Lake, a lithium project in Nevada that has more than 8,000 acres showing strong geographic similarities to Albemarle’s Silver Peak Nevada lithium mine, the only producing lithium mine in North America. Drill hole JPP22-02 returned up to 820 ppm lithium, backed by an average of 334 ppm lithium in 30 samples collected from shallow surface soils (<500 ft.), with further ongoing drilling eyeing a maiden resource estimate.
- White Willow, a more than 15,000-hectare lithium-tantalum project in Ontario, with more than 75 outcropping pegmatites identified that remain underexplored, and an astounding 27 km of strike length to date. The property is host to a fertile lithium-cesium-tantalum (LCT) system composed of two highly evolved LCT-pegmatite dykes, one of which contains the Maple Leaf Showing that appears at least 50 m wide and outcrops for 350 m along strike. Initial samples assayed as high as 0.5 per cent Li2O and 14.64 per cent Ta2O5 in and around the dykes.
- Four strategically positioned Ontario pegmatite projects, including Bluett, Mead, Lee Lake, and Gathering & Triangle Lake.
Further results at Bingo, the second pegmatite dyke in White Whillow’s LCT system, reveal “some of the most evolved chemical signatures on the property,” according to a news release. Yielding 10 targets with robust indicator minerals validates CEO Deepak Varshney’s belief that “Willow is a flagship asset where Ontario’s next major lithium discovery will occur.”
Usha will explore pegmatite dykes with positive indicator minerals, prospective fractionation indicators, as well as areas with anomalous mineralization, through prospecting and outcrop exposition, leading to a 4,000 m drill program slated for spring 2024.
As evidenced by Usha stock’s (TSXV:USHA) 84.62 per cent loss year-over-year, the market has been content to abandon the company’s minimally developed but apparent upside, clearing the way for a contrarian allocation.
Continue your due diligence by watching Ryan Dhillon’s recent interview with Varshney and by reading Usha Resources’ latest investor presentation.
Join the discussion: Find out what everybody’s saying about these micro-cap stocks on the AnalytixInsight, Midnight Sun Mining and Usha Resources Bullboards, and check out Stockhouse’s stock forums and message boards.
This is sponsored content issued on behalf of AnalytixInsight, Midnight Sun Mining and Usha Resources, please see full disclaimer here.
