Brought to you by BULLS N’ BEARS
Andrew Todd
And the red contagion spreads.
The Middle East conflict took another ugly turn to start the week as more agitators piled into the fray, with Houthi attacks on Saudi Arabia further inflaming regional tensions and sending global oil prices soaring. A strike on Riyadh airport that killed 12 led Trump to accuse Iran’s Islamic regime of steering the attacks to push oil prices higher ahead of the US midterms.
If that was the plan, it appeared to be working, with crude surging to US$107 a barrel this week even as Trump eased sanctions on Russian oil. Meanwhile, hopes of ending the more than four-and-a-half-year war in Ukraine looked just as forlorn as the prospects for peace in the Middle East.
Over on Wall Street, the AI trade looks to have finally come undone. Surely it wasn’t little old Aussie AI Firmus and its failed IPO that broke the camel’s back?
More likely, it’s China’s latest memory-chip advances that are rattling the sector, with semiconductors falling for a seventh straight NASDAQ session, down 14 per cent since the start of last week. OpenAI led the pandemonium after paring back its revenue expectations, as businesses increasingly turn to cheaper Chinese alternatives for token-heavy workloads.
The AI contagion spread rapidly across the Pacific, sending Korean chip giants SK Hynix and Samsung tumbling 14 and 18 per cent respectively this week alone! With both heavyweights accounting for a substantial slice of South Korea’s tech-heavy KOSPI, the index suffered a bone-shattering 21 per cent plunge in just seven trading sessions as doubts over the AI boom collided with fears of further interest rate hikes. Thursday alone delivered a 7.6 per cent KOSPI wipeout, triggering trading halts and liquidations countrywide, with what had been one of the world’s hottest AI-fuelled markets now looking like a leveraged investor’s nightmare.
To cap off an already bruising week, surging oil prices have reignited inflation fears and sparked a bloodbath across Australia’s mining sector. With the fuel supply squeeze again rearing its ugly head, headlines of job cuts at BHP and Rio Tinto have only added to the gloom, rattling investors and raising fresh concerns about the outlook for the broader resources industry.
Rio Tinto is staring down the barrel of more than $500 million in additional annual Pilbara costs from sky-high diesel prices, while its shares have shed nearly 10 per cent in under a fortnight and took another hit during Thursday’s rout.
The pain may be even worse for little brother Fortescue, with early forecasts suggesting its September quarter could deliver its first loss-making quarter in years — potentially the first since 2009, as some 67 consecutive profitable periods come undone.
One bright spot amid the carnage is the continuing takeover tussle for Northern Star Resources, Australia’s biggest listed gold miner. South African giant Gold Fields is reportedly open to sweetening its $40 billion bid with more cash and is dangling the benefits of an ASX listing as its chief executive embarks on a baby-kissing tour to win over Australian investors.
Gold Fields boss Mike Fraser has also reportedly discussed selling some Northern Star mines to rivals, including Raleigh Finlayson’s Genesis Minerals, should the takeover succeed. That would allow the South African miner to concentrate on its flagship Kalgoorlie Super Pit, Alaska’s Pogo mine and the undeveloped Hemi project in WA’s Pilbara.
This week’s Runners list was another small serving from a harsh vintage, with the Australian small ordinaries again among the market’s biggest casualties as domestic money flow tightens thanks to a mix of housing pressures and inflation. One bright spot on the ASX lately has been the IPO market, with several fresh listings making our Runners of late. This week’s top spot went to a plucky Israeli pregnancy biotech hopeful that managed to buck the broader market’s miserable mood for its ASX debut.
IDENTIFAI LTD (ASX: ID1)
Up 170% (20c – 54c)
Bulls N’ Bears Runner of the Week is Israeli biotech newcomer Identifai Limited, which made a stellar debut on the ASX after raising $10 million in a float at 20 cents a share.
The company’s flagship Windrose platform uses a simple blood sample from the mother as early as nine weeks into pregnancy to screen for more than 280 genes linked to genetic conditions in unborn babies. By combining DNA sequencing with AI, the technology aims to flag a much wider range of potential health problems earlier in pregnancy, without the need for invasive procedures such as amniocentesis.
Shares in Identifai started strong and never looked back despite the shaky market backdrop, peaking at 54 cents on Thursday for a whopping 170 per cent gain on the week, as investors latched onto the potential of its technology.
The company says it is targeting a significant unmet medical need, with the World Health Organisation (WHO) estimating that between three and six per cent of babies worldwide are born with a genetic or congenital disorder. Some conditions can be difficult to identify before birth, yet early detection can help doctors and families prepare for treatment well ahead of time.
While existing non-invasive prenatal tests primarily screen for common chromosomal conditions, Identifai says Windrose can assess fetal risk across more than 280 genes linked to conditions that may be actionable during pregnancy, delivery or shortly after birth.
By combining AI with advanced genetic analysis, the company is aiming to push prenatal screening well beyond its traditional limits, initially targeting the US market with a platform backed by a growing intellectual property portfolio.
AEVENIRA LIMITED (ASX: AEV)
Up 133% (0.6c – 1.2c)
Slotting into second on the week was fertiliser frontrunner Avenira, which surged 100 per cent this week after securing an $85 million funding lifeline from major shareholder and strategic offtake partner Hebang Biotechnology. The cash injection will fully fund development of its giant Wonarah phosphate project through to first shipment and ongoing operations.
The package comprises an eight-year, $50 million development facility from China - at a staggering Reserve Bank cash rate with no additional margin. A further revolving line of $35 million in working capital will also carry the same benefits and term.
Principal and cash-interest payments are deferred for two years, giving Avenira breathing room as it makes the leap from developer to producer.
The deal is a major vote of confidence from Chinese-based shareholder Hebang, which already holds a 60 per cent voting interest and has committed to buying Wonarah’s premium phosphate. It also gives Avenira a clearer runway towards first direct shipping ore (DSO) shipments, targeted for the first half of next year.
The prize is a monster Northern Territory resource hosting a JORC estimate of 812 million tonnes at 18 per cent phosphorus pentoxide, for a whopping 146 million tonnes of contained phosphate.
Avenira plans to start with a relatively straightforward direct shipping operation to generate early revenue, before potentially stepping up to higher-grade processing and, further down the track, downstream products such as yellow phosphorus and thermal phosphoric acid for battery and electronics markets.
The timing could hardly be more interesting. Phosphate has been a quiet runner amid Middle Eastern disruptions, with supply-chain risks putting the spotlight on fertiliser security and the importance of reliable sources beyond geopolitically exposed regions. For Avenira, a well-funded path to production could put Wonarah in the frame as buyers look to secure future supply.
With the funding hurdle cleared and first shipments on the horizon, Avenira appears at the doorstep of turning its enormous phosphate endowment into a producing Australian asset.
IMAGE RESOURCES LTD (ASX: IMA)
Up 84% (1.9c – 3.5c)
Rounding out Runners is repeat customer Image Resources, after it kicked off the week on a tear despite having no fresh news to the market. The fun police down at the ASX came knocking around lunchtime on Tuesday after shares climbed from 1.9 cents last week to a high of 3.5 cents, issuing a “please explain” speeding ticket in the process.
Image responded that it was unaware of any undisclosed information that could explain the move, but pointed to an announcement last month detailing a $5 million cash advance from major shareholder and strategic partner LB Group.
The advance forms part of ongoing negotiations over a potential deal involving Image’s Durack and Yandanooka mineral sands projects in WA. The proposed transaction could see LB Group acquire a significant interest in the projects for $20 million in cash, alongside an interest in certain plant, equipment and other assets expected to be used in their development and operation.
However, Image’s story is about more than just mineral sands, with the company recently giving punters another reason to straighten up in their seats, after drilling at its latest Erayinia-King gold project near Kalgoorlie and returning a swag of high-grade results.
The standout was a 4.5-metre hit grading 22.4 grams per tonne (g/t) gold from 128m, including a chunky one-metre section at a whopping 98.55g/t. Other drilling returned 14m at 2.84g/t and 16m at 2.51g/t, adding further sparkle to the historic mineral sands player’s emerging gold story.
Image says it has completed a 50-hole, 5450-metre drilling campaign at Erayinia-King, with mineralisation traced to only 140m vertical depth, leaving plenty of potential at depth.
The project already hosts some two million tonnes at 2.1g/t gold for 139,000 ounces, with an updated resource now being prepared.
The gold story gives Image a potentially valuable second string to its bow beyond the established mineral sands business. Meanwhile, talks with LB Group could open another lucrative chapter for Image as a strategic review gathers pace at its Durack project, fresh from a hefty 43 per cent resource upgrade to 37.7 million tonnes.
With a sizeable mineral sands portfolio and a potential major deal in the works, Image has plenty to explain to the ASX why investors have been piling back in for weeks.
Is your ASX-listed company doing something interesting? Contact: mattbirney@bullsnbears.com.au