AIM Resource Shares I Am Considering

13 September 2018

Like most investors I keep an eye on many shares that I don’t currently hold using an online platform. Currently my watchlist has around 50 mostly AIM stocks. It enables me to easily scan the current price, along with any recent news. I normally opt to start or add to positions on the “bad days” as like anything price is key and one of the most important lessons I have learnt since becoming a full-time investor is that things move much slower than you often think. As such I can spend many months watching a stock before deciding to buy anything other than a small holding.

Along with my watchlist I keep another list split into different sections and I thought I would list some of the resource stocks that I am considering. These are all pretty high risk in my opinion and where I hold stock I have mentioned that against the brief comment. Please also note that if you do decide to look into any of these companies further, or invest, you will need to do the appropriate level of research as I have spent many months researching these companies and have only put a brief paragraph against each.

Keras Resources (KRS)

Broadly speaking there are two strings to this one. Firstly, there is the Australian quoted Calidus Resources. After this there are two projects in Africa with manganese, cobalt and nickel. My reason for considering starting a position here is that ignoring the African projects the value of the Calidus shares is roughly over double the market cap of the KRS stock and they have discussed the possibility of moving this stock directly to shareholders as an inspicie transfer mid 2019. There are issues with the KRS stock in terms of poor shareholder sentiment along with many locked in at levels greater than where it trades (pretty much guaranteeing a price ceiling) and although the company has mentioned working towards improving this to date I have seen nothing. I have been following the Calidus announcements in Australia and there does seem to be a strong appetite for Gold stocks in Australia (and the UK listed companies too) and my view is that a reasonable position here would be a wise investment looking at a one to two-year time frame.

Red Rock Resources (RRR)

I have previously held a position in RRR but currently hold no shares. In a similar vain to KRS the company has a holding in an Australian quoted company, Jupiter Mines, but a difference is that the company is focused on manganese in Africa. As I write this blog post the value of the quoted stake is around £3.5m against a market cap of just over £4m. I have heard talk about an in-specie distribution of the Jupiter Mines stock to RRR shareholders and whilst I am cynical, as it pays a dividend no doubt being utilised for corporate costs and other projects, if that were to happen that alone would be incredibly rewarding to RRR shareholders. As with KRS I am taking the simple view of buying the stock for the quoted underlying holding and taking the other assets for free.

African Battery Metals (ABM)

Previously ABM was known as Sula Iron & Gold and updated their name to focus on battery metals in Africa, specifically cobalt, lithium, copper and nickel. There is no doubt that shareholders in ABM will be disappointed. Over the last year the share price has declined but I am looking at this for what the future may bring. A recent share consolidation may make ABM a little more attractive to investors as it becomes a penny share rather than a sub penny share along with a deal with Two Shields Investments (TSI) for some African assets to be sold into ABM for stock.

Probably one of the highest risk companies that I am considering I believe that the board is well positioned to take the company forward and if they can progress one or two of the opportunities currently on the table it could propel the share price significantly higher than its current level. In simple terms it really is a stock where the slightest positive announcement could see a reasonable return and perhaps a path towards much greater things. I hold a small number of shares in ABM and am looking to increase this over the coming months as the news flow makes the investment case clearer.