Market Open(ed) Issue #11

HUNTING ON HOME SOIL

STEWART MCCALLION RETURNS HOME WITH BURLEY

REDOX BREAKS

ASX IPO DROUGHT

PLUS, THE LIZARD KING GIVES HIS TWO CENTS ON PROPOSED PENNY STOCK BANS

THE LIZARD KING

With calls being made to ban penny stocks on the ASX, the Lizard King turns his eye to the need for small cap exploration (and the chicanery of the big boys).

Much like the English get to decide what is in the spirit of cricket and what’s not, I am claiming the complete authority on who gets to determine what sectors of the financial world get the dodgy label slapped on them.

There have certainly been a few small caps collapses recently, with Lake Resources, Imugene and Brainchip Holdings some of the higher profile instances of market volatility. However, is the small-cap industry much worse when it comes to chicanery?

Price Waterhouse Cooper has had a little tax leak scandal which collapsed a business once worth a quarter of a billion dollars in billings a year, Tesla is facing new charges of manipulation, and FTX had Gisele Bundchen and Steph Curry flogging their crypto exchange – it was worth about $32 billion before it became clear they were funnelling money into amphetamine-fuelled hedge fund bets in the Bahamas.

If they could invest in exploration with small-cap trades in the United States, they’d have a mining industry worth a damn!

The majors tend to stay away from new dirt without any proven resources, and if a couple of shady Telegram groups pumping up minnows is the price we pay to have exploration, so be it, I say.

Maybe it’d be handy to have wouldbe punters take a little financial literacy test before opening a CommSec account and get turned away from trading like a (poor) drunk in shorts at the casino. Still, I suppose then nobody is left to buy my unwanted shares ...

FROM THE EDITOR

DroneShield, a tech startup based in Australia, recently landed a $9.9 million contract from the US’s Five Eyes Department of Defence. This comes after a successful contract worth $3.8 million with the same customer. DroneShield’s chief executive Oleg Vornik is optimistic about the future, stating that his company has what it takes to handle multi-year contracts. Investors seem to agree, as there has been significant momentum in the rapidly expanding market, and the company is on track for another record year of cash receipts in 2023. There is a clear and present demand for counter-drone solutions in these uncertain times. This presents a significant opportunity for Australia’s emerging technology sector to capitalise on. The Pentagon’s most recent drone strategy recognises the threat posed to DoD operations by drones that can be easily obtained and operated by state, non-state, or criminal individuals. Despite existing defences, small, affordable, and simple drones have recently caused considerable harm.

There has been a surge in demand for counter-drone systems in the US, but unfortunately, many people have resorted to using non-integrated and repetitive solutions. With an overwhelming selection of over 575 options, choosing the most suitable method can be challenging.

And it’s important to mention that not only military clients but also civilian entities, such as airports, are willing to invest in counter-drone systems to ensure the safety of their operations. In December 2019, during the Christmas holiday season, Gatwick Airport suffered significant disruption due to drone flights, resulting in hefty financial losses. The airport invested around $7 million in a counter-drone system to prevent such incidents from occurring again.

DroneShield has received customer orders amounting to a staggering $29 million, indicating its clientele’s high level of commitment. With consistent monthly sales of $10 million, the company is poised for a bright future, with projections for FY24 looking exceptionally promising. Impressively, their revenues have tripled from the previous year, and we are only halfway. The company aims to achieve $40M-$50M in revenues by 2023, with an anticipated NPAT of $15M.

I have been observing this company for a while now and must commend the team behind it for prioritising the safety benefits of its products. They have the potential to follow in the footsteps of other successful companies. Like the evolution of great companies, patient investors who commit stand to make significant gains.

Rueben Hale

LOOKING FOR LITHIUM ON OLD STOMPING GROUND

By Rueben Hale

Stewart McCallion was introduced to geology in Canada’s northern province of Quebec more than 30 years ago. Now this affable man of the people is revisiting the country where he was raised in the dual role of CEO and MD of Burley Minerals with high hopes that his traditional approach will accelerate the company’s exploration endeavours at its promising Québec

McCallion, an engineer with postgraduate qualifications, has been in the resources industry for over 25 years. He began an accomplished career in mineral exploration in Northern Canada before circumnavigating the globe working on resource development projects and settling his family in Western Australia.

“I am looking forward to returning to the ground in Quebec and reacquainting myself with the terrain,” McCallion says.

People who know him, including this author, will tell you this affable cycling and yoga enthusiast

is bold but also open, frank, and loyal to a fault.

“I don’t fear too many things, and look, that could either be judged as good or bad – I’m not too sure,” McCallion chuckles.

The Canadian is enthusiastic about utilising Burley’s location near Quebec’s only active lithium mine. He sees potential for profit with his company’s recent acquisition of the Chubb Lithium project and its options for the nearby Bouvier project, which contains known lithiumbearing pegmatites.

And McCallion’s years spent working on projects across the span of Western Australia’s resources industry will also come in handy with plans to circle back on the company’s stalled but highly promising Yerecoin Magnetite Iron Project before heading north to the Pilbara coastal town of Onslow to take a close look at geophysical data for future targeting at its Dragon and Mt James Lithium Projects in the Gascoyne corridor.

According to McCallion, there are nuances that one must become accustomed to depending on where you are working. Still, he understands that people fundamentally want to be treated with honesty and respect, which will be the cornerstone of his approach in his new role.

“My leadership style is based on mutual respect and inclusivity. I value all parties’ input and am receptive to feedback on potential concerns or opportunities.”

When it comes to managing a team and an exploration project, what is your style?

As resource professionals, we understand the value of a good find and its potential. However, we also recognise the importance of being realistic and exercising caution. Our priority is always to remain open-minded and conduct thorough due diligence to maximise shareholder returns. That means starting on the ground and systematically and purposefully coming to understand a resource.

I’ve noticed two different styles of exploration. The first involves focusing on a specific area, while the other takes a more scattered approach by exploring Greenfields – what camp do you fall under?

I plan to take a focused and evidence-based approach when exploring, using targeted drilling to increase the likelihood of discovering something significant. I’m particularly excited to apply my knowledge of the rocks to our Canadian projects – this was where I did my geology field school 30 years ago while studying for my undergraduate degree.

Based on my experience, investing significant time in obtaining comprehensive information from the field is wise. Collecting data is crucial, and although it may be a bit tedious, it is the most cost-efficient way to proceed. It is essential to carefully examine rocks, soil samples, and geochemical anomalies to determine their significance. Before drilling, we may also consider utilising geophysics as a preliminary measure. Despite the occasional fire restrictions at Chubb, we are making every effort to conduct drilling activities. Additionally, we intend to begin drilling at Bouvier within the next six months. However, we must ensure our drilling targets are clearly defined.

But it’s just as important to understand the ways of the Québécois, too, right?

Quebec is quite a unique community, or province, within Canada. It’s French-speaking and has a long history with a distinct culture. So, understanding Quebec and the area and the Quebec law, that is, the ‘Quebecers’ in English, let’s say, is an integral part of doing business in that part of the world.

All right, well, let’s flip it around. For someone who doesn’t understand the culture, what challenges would they face?

Business practices vary across regions and

countries, which is also true for Quebec QC and French laws. As someone familiar with the local business culture, I find it beneficial when conducting negotiations. The community’s unique business ethos and negotiation process requires a certain level of understanding and familiarity, which is essential for successful negotiations. This is true in many other places as well.

Is your background also helpful for dealing with First Nations people there?

Canada is an officially bilingual nation that celebrates its multiculturism and recognises the significant contributions of the First Nations peoples. Resource development in the north can positively impact these communities, and Burley has established partnerships with enterprises to collaborate with them.

Where do you hope to take Burley under your leadership in the short and long term?

We must finalise the acquisition of Bouvier. At Chubb, our focus on data is paramount. We need to gain a deeper understanding of what we currently have. Additionally, I’m eager to reintroduce some West Australian assets into the mix. We have excellent infrastructure near our Mt James and Dragon lithium projects in Onslow, and I look forward to being on-site to

assess the situation. Moreover, we still have our Yerecoin Iron Project investment in progress, which is going through the Wardens court.

What about more acquisitions?

We remain committed to exploring new opportunities and discovering promising prospects for resources such as lithium and iron ore. Despite the current challenging regulatory environment, these minerals are essential, and we must persevere in our search for them. Therefore, we will persist in our search for these resources and ensure their availability in the future.

MANSOOR’S RADAR

Silica Sector Overview and VRX’s Arrowsmith Leading from the Front

Silica sand is the most-used commodity on the planet after air and water. It is the main ingredient in all types of glassmaking, including specialty solar panel and high-tech glass. The glass manufacturing industry demand is increasing at a rate of 5-6% per year, or about 8-10 million tonnes pa. Around 47% of the world’s glass is manufactured in Asia.

Silica sand is also an essential component of the foundry and casting industries. The largest foundry industry is in Korea where it dominates the industry particularly for large marine components.

Silica sand is also the main ingredient in concrete.

Silica sand is a finite resource that is rapidly being exhausted and the Asia-Pacific region is cur-

rently experiencing increasing demand at a time of a global supply shortfall.

IN FOCUS: ARROWSMITH NORTH:

ASX:VRX’s mining and processing operation and production is expected to commence initially at Arrowsmith North in 2023, subject to final environmental approvals.

A revised capital estimate is currently underway on a tailored 2Mtpa processing plant with a unique patented custom process circuit.

VRX Silica has identified long-lead items and commenced the specification and production of tender documentation of processing equipment for the plant in preparation for the procurement

process in order to enable a timely construction program following a decision to mine at Arrowsmith North.

VRX Silica, like rest of the resource sector, is seeing delays in the approvals process in Western Australia. VRX Silica deferred the tender process for major equipment until precise commencement date can be established.

However, previous tenders have identified Original Equipment Manufacturers (OEM) will be requested to supply updated tenders with firm capex estimate.

capex estimate.

IN FOCUS: ARROWSMITH NORTH OPEX/CAPEX

A Life of Mine operating margin of A$20/t highlights a robust margin. VRX Silica is working on revised capital estimate to reflect staggered capital deployment approach. It is expected the capex requirement may be lower than previously highlighted.

With robust demand side, price forecast of highgrade silica may remain at similar level as earlier studies estimate of A$50/t.

Charger’s spodumene strike

Assays are still due, but Charger Metals have claimed an early success at Bynoe after intersecting spodumene-bearing pegmatites up to 22 metres thick in first pass drilling over its Enterprise Prospect in Australia’s top end. The extent of lithium mineralisation is yet to be revealed, but Managing Director Aidan Platel said tapping into the mineral less than a kilometre away from Core Lithium’s Blackbeard prospect was certainly a validating result for its exploration strate

Ubaryon’s Australian enrichment

There is a growing trend of countries adopting nuclear power, and Ubaryon has been granted permission to continue developing its innovative uranium enrichment technology in Australia. Okapi Resources (ASX:OKR), the major shareholder of Ubaryon, owns a significant amount of uranium resources in the United States. Given the possibility of sanctions against Russia, Andrew Ferrier, the Managing Director, emphasises the importance of achieving energy independence and ensuring a secure supply. “Russia is currently a key player comprising circa 45% of global enrichment capacity, but the pressure is building for sanctions on Russian nuclear fuel, particularly in the U.S,” Mr Ferrier said.

Regenr8’s rare opportunity

Regener8 Resources (ASX:R8R) has recently acquired tenements with immense transformation potential. These sites are close to two rare earth targets that have produced some of Australia’s most significant tenor strikes.

The Ponton Dyke and the Cundeelee Intrusion within the Queen Victoria Spring Nature Reserve have remained largely undeveloped. However, Regener8 has identified an opportunity outside restricted land within the same geological domain. They have secured an East Ponton Future Metals tenement package that is highly prospective for several critical minerals.

Krakatoa’s lithium crown

Krakatoa erupted after high-grade returns up to 4.3% Li20 claimed a discovery at King Tamba and doubled the explorer’s share price.

King Tamba has a history of tantalum production, and Krakatoa consider it prospective for a wide range of critical metals, but the focus is now on lithium and drilling is imminent on a ready target as the company looks to add a lithium resource to an impressive trove of rubidium it has already reared at the project.

Altech’s expert assembly

Altech Batteries (ASX:ATC) has assembled a team of highly-skilled professionals for a series of Critical Expert workshops led by the Managing Director, Iggy Tan. Tan, known for his groundbreaking battery technology, impressed key suppliers by showcasing some of Germany’s most innovative manufacturing minds eager to join Cerenegythe salt-powered battery project. These batteries are not reliant on the critical mineral supply chain, making them a potential game-changer in the lithium-ion space. With the addition of this extensive technical and manufacturing expertise, Altech is now better equipped as it moves towards definitive studies.

Dreadnought’s dilated discovery

Dreadnought Resources (ASX:DRE) has discovered a rare earth ironstone deposit in the Gascoyne province at Mangaroon. With China enforcing export bans, the potential of this discovery has increased by 40%. Additionally, other rare earth discoveries with even higher NdPr to TREO ratios have yet to be counted. Overall, the resource at Mangaroon already exceeds the global average by over 50%.

THE PUBLIC PARLAY

By Staff Writer

Redox shares dipped after becoming the first $100m IPO in over a year, but investors are still hopeful for a new wave of floats.

Through exploring the lithium battery industry, it became clear that what started as a family business has an impressive growth story to tell, and it could keep building on a current market cap of $1.23 billion.

The IPO business is profitable for lawyers and investment banks, and the industry wants to get going again after an exceptionally strong 2021 saw the highest number of floats in a decade and marked the biggest year for resources IPOs since the height of the 2000s mining boom.

While Redox’s debut share price dipped by 7.5 per cent after four days and gave some doubt on the future of $100 million-plus deals for the year, the upcoming calendar of IPOs remains dominated by the resource industry.

The small-cap listings so far this year have been a mixed bag, they have averaged a return in the positive but a marginal one, and you must go back more than half a decade to find a crop of IPOs that collectively produced gains for investors.

Fund managers certainly have some qualms over how the industry is run, with long wait times between an investment decision and trading, fixed debut times, and skittish retail investors complicating their investments. However, the riches returned in the past decade of listings would suggest the system is hardly broken.

It is not long until another $100 million-plus listing attempt, with Abacus Storage King planning to hit public trading on the first day of August and raise $225 million at an issue price of $1.41, and bankers remain hopeful a success story will open the markets for a new wave of floats.

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