Finishing off 2024: Natural Hydrogen, High-Grade Copper and US Rate Cuts
Markets are volatile heading into 2025 and what small-cap investors need to know
As beach eskies fill and trading apps close ahead of Christmas, we wrap up some important points you don't want to miss from the end of 2024.
As the year winds down, three bits of news deserve attention: significant moves in the natural hydrogen sector, promising drill results from Asian Battery Metals (ASX: AZ9), and the market implications of the US Federal Reserve's recent rate cut.
Some developments that caught our eye:
TEE's neighbour Koloma has started hiring reservoir engineers - the type of role that comes after a discovery
Asian Battery Metals confirmed 3%+ copper-nickel grades at North Oval
US rate cuts are shifting the landscape for commodity plays
Let's dive into what these developments mean.
Natural Hydrogen Continues to Gain Interest
Something's brewing in the natural hydrogen space. Koloma, backed by Bill Gates, Jeff Bezos and Mitsubishi, among others, has posted six new jobs in the past fortnight - and one position stands out.
They're looking for a Senior Reservoir Engineer - this role primarily involves maximising the economic recovery of hydrocarbons from a discovered reservoir.
Private companies like Koloma can afford to stay quiet after a discovery - no shareholders to update, no continuous disclosure requirements to meet. But their actions speak volumes.
For a private company valued north of AUD $1 billion that's raised nearly US$300 million in the past year, this level of technical hiring suggests something significant is happening behind the scenes.
We announced our investment in Top End Energy (ASX: TEE) a few weeks ago, particularly due to their strategic position near Koloma.
At a modest $25 million market cap and perfectly positioned to drill in 2025, TEE sits in a pristine position next to a neighbour making these kinds of moves.
With indications Koloma has made a discovery, we see large upside potential in TEE in 2025.
AZ9 confirms High-Grade Copper & Nickel
Asian Battery Metals (ASX: AZ9) continues to show promise with high-grade assays from their North Oval project.
The copper and nickel grades, both above an impressive 3%, confirm the fertility of the area, as these results were 500m northwest of their initial high-grade copper discovery of over 6% at the Oval project.
The grades displayed for massive sulphide mineralisation from shallow depths are impressive. What AZ9 needs now is to confirm some sort of continuity in the project between discoveries and then find the main source at depth. Management is tackling both in 2025.
With results from four more holes due early in the new year and deeper drilling planned for Q1 to find the potential feeder system, AZ9 should be on everyone's watchlist at a minimum.
Mongolia might raise eyebrows for some investors. But when Rio Tinto drops US$12 billion on their Oyu Tolgoi copper mine in the region, our fears of potential partners for the project are minimal.
Sitting next door to China, the world's copper-hungry giant doesn't hurt either.
If AZ9 is able to find that feeder system in 2025, one could expect the price to be multiples of what it is today at circa 5c.
Any major discovery over the next 12 months would easily set AZ9 on its way to becoming a mine. Keep your eyes focused on this one.
The Fed Blinks on US Interest Rates
With the US cutting rates last week, it signals that there could be economic headwinds ahead. For Australian investors, this creates an interesting setup.
The Aussie dollar faces challenges as it drives capital inflows; those looking for higher rates in the US turn to Australia. A weaker AUD on the world stage means the cost of everything we import goes up, adding to inflationary pressures in Australia, which means rates in Australia will likely be on hold in the short term.
What Does This Mean For Small-Caps?
If your company is exploring outside of Australia, you want them to have a strong bank balance, as the cost of exploration has just become more expensive.
A lower interest rate in the US typically weakens the dollar by reducing the yield on dollar-denominated assets. This makes longer-term investments in commodities like gold and copper more attractive to foreign buyers, who can now purchase these goods at a relative discount.
We're positioned well here with our gold investment in Bubalus Resources (ASX: BUS), a small-cap late-stage gold explorer based in Australia, and our copper investment in AZ9.
The US Federal Reserve rate cut has created awareness among small-cap investors. Being well-researched and informed is a must in a volatile market.
A volatile market creates opportunity; it's about seizing those opportunities into 2025.
With the market slowing down from now to the end of 2024, we want to thank all our readers for a big year. If you want us to cover anything in 2025, please feel free to email info@equitiesclub.com, we’re always open to ideas.
Enjoy the sun and kick back; 2025 could be a transformative year for investors.
