Latest Matt Report out, mentions ADNTHE MATT REPORT "I trade and...

Latest Matt Report out, mentions ADN

THE MATT REPORT "I trade and wear track pants, and you can too." - Matt Hayes I spend most of my days researching small cap ASX stocks. Here's a report on those findings ... (my investment strategy is detailed at the end of this email) SEPTEMBER 2020 REPORT Here's an update on my earlier picks, as well as my pick of September. WARNING!This report is intended for friends and referralswho areSOPHISTICATED INVESTORS ONLY. I do not have a financial services license and am not a financial advisor. This is not personal advice, the reports below are my personal views and meant for educational purposes to outline the reasons I invest. If you are a retail investor you should NOT be investing in these stocks or taking advice from someone you don't know! Minotaur Exploration (ASX:MEP) Septembers Stock Pick. I started writing this report last week, the SP keeps going up, so I'm sending this report half baked. This is an arbitrage play that is one third the relative price of its JV partner and looks to be playing catch up now. Executive Summary: ASX: MEP Current share price: 0.079 Fully diluted MC: $45m Cash at bank: $8.2m Total shares on issue: Approx 570m including all shares and options Target Price: 0.16 Read this if nothing else: MEP owns 49% of ADN’s Great White project, ADN currently has a fully diluted MC of $400m ADN market cap is based purely on the Great White asset Great White is a development stage 20Mt JORC Halloysite Kaolin resource Halloysite Kaolin fetches between $700 - $5000 per ton, minimal processing is required MEP/ADN has one of the worlds highest grade resources at surface MEP ownership will dilute to 25% upon decision to mine, at which point the project value should re-rate higher Current project NPV $736m (pre tax 8% discount) from PFS EBITDA (LOM) A$2.06B from conservative $700 per ton base case 26 year mine life (@500ktpa) at surface, DSO, minimal processing required IRR 175% Cap Ex requirement $28m (MEP portion $7m) with decision to mine fast approaching Deal Terms: In March 2020, Andromeda Metals Ltd (ASX: ADN, ‘Andromeda’) met Stage 1 expenditure commitment of A$3 million from execution of the Joint Venture Heads of Agreement from April 2018. As a result, Andromeda earned 51% in the Great White tenements. Andromeda elected to sole contribute a further $3.0M over the three year period to April 2023 in order to acquire a further 24% interest in the Project, thereby taking its tenement interest to 75%. Alternatively, Andromeda is able to progress to 75% equity interest should a decision to mine, supported by a Bankable Feasibility Study, be agreed by the joint venture partners. Andromeda is the designated Manager and Operator of the JV. Asset: Great White is a high purity Halloysite Kaolin 20Mt resource near surface in South Australia. It took me a long time to get my head around the commercial applications and market for Halloysite and Kaolin. It's uses are diverse and can be either very simple (ceramics) or complex (Hydrocarbon cracking catalyst). It is a multi billion dollar a year industry with supply shortages through out Europe and Asia. Multiple off-take partner agreements across diverse industries are required to be made and a large customer base engaged. This requires long sales lead times, ADN commenced that process over a year ago and have letters of intent for purchase ready to convert to off-take agreements. If you wish to dig further, check out content created by extremely savvy geologist & investor Samso and ADN MDhere. ADN are close to signing off-take agreements with customers, indicative first stage sale price is $700p/t to $1000p/t for simple a DSO with minimal processing required. The higher grade component containing Halloysite (approximately 9.7mt) will fetch up to $4000 - $5000p/t and is expected to be in production during second stage of project development. A minimum 50% Net Profit is projected from commencement of operations based on a 230ktpa DSO operation in year 1. MEP also have the option to acquire a high grade historical producing gold asset in QLD they are conducting due diligence on (MEP 100%), and a JV with Oz Minerals on high grade Copper assets in QLD JORC resource of 9.1m ton at 1.4% Cu and 0.3g/t Au. (MEP owns 20%) as well as several other high grade copper exploration assets. Team MEP doesn’t fit my usual criteria, MEP management are missing some key capabilities to make a well rounded team. There is no strong marketing or corporate presence within the team and historical share price shows it despite some excellent projects and strong track record of exploration. Fortunately, the ADN team are doing an exceptional job of marketing their company and the Great White asset, creating this arbitrage opportunity as the market is delayed in attaching MEP's value/involvement. A perfect example of this is the trading halt that ADN are currently in due to a JORC mineral resource on a shared asset. MEP are still trading. The directors of MEP themselves don’t have much skin in the game. Normally a big red flag for me. But this is a pure and simple arbitrage play. The real value in this stock, at this moment, is in the work Andromeda have done and are doing. They are leading the way on fast tracking a highly profitable, low cap-ex industrial material project that MEP get a 25% free ride on. The figures from the PFS are quite extraordinary. Peer Comparison: This is an arbitrage play, so the peer that matters most is ADN. ADN's current fully-diluted market capitalisation (including unconverted ADNOBs) sits at just over $400M. Based on the PFS, size and grade of resource, low cap-ex and NPV, I think their market cap is fairly priced and will continue to grow as they rapidly release material news flow. The simplicity of mining the Halloysite Kaolin, permit stage and shortage of supply globally means this mine could be in production as soon as next year. Permitting and approvals however mean the target start of production is February 2022. Still a remarkably short period of time to achieve bulk tonnage mining. Initial targets are 500ktpa at a conservative low end estimate of $700 per ton. The ADN share of start-up capital is $21M (on PFS figures) so they will need to raise money and further dilute. MEP should be able to cover their costs from their current cash reserves. If equally valued based on share of Great White project, MEP should have a current market cap of $130m, or 0.23 a share. But they aren’t nearly as dynamic as ADN in marketing themselves to investors. So I’m applying a generous 30% discount and giving MEP’s share of the project a current conservative valuation of $0.16. So you get the cash and gold/copper projects for free. Near term catalysts: The Maiden JORC resource for Hammerhead is due today or tomorrow with ADN. The Hammerhead asset is within the tenements co-owned by AND/MEP and has tested extremely high grade Halloysite Kaolin. The material from this deposit has potential industrial applications which may value the Kaolin at up to $5000 per ton. This should see am immediate impact on the ADN share price once it comes out of trading halt. MEP however is lagging ADN in reacting to news, and oddly, is not in a trading halt currently despite what occurs to me as a material announcement. An initial mineral resource for one of their most important high grade assets could have significant impact. DFS is expected as soon as December or January, this should see the share price significantly rerate higher for both ADN and MEP. ALICANTO (ASX:AQI) Alicanto (ASX:AQI) Key Points:Exposure to exploration along strike of the largest high grade copper project in the world Sentiment: BUY I went to the RIU Resergence conference a week ago, about 50 companies presented, many were spruiking copper as the next commodity to boom. Peter George’s presentation made it abundantly clear if you are going to look for copper anywhere in the world, Alicanto have the best ground for it. Drilling has commenced, if they hit high grade thick intercepts – I expect the share price to quadruple from here. TREK METALS (ASX:TKM) Key Points:Drilling commences soon on high grade prospects Sentiment:BUY The recently appointed board have a reputation as some of the best in the business. The original team that founded Pilbara Minerals taking it from $5M to nearly $2 billion. They have put in over $1m of their own cash, and secured some highly prospective ground with very high historical gold grades at surface. Drilling commences soon. I’ve spoken with John Young and his excitement about Trek is palpable. Success depends on the bit, but I would back this team at this share price without an asset. TALISMAN (ASX:TLM) Key Points:Kerry Harmanis is new Chair and shopping for WA Gold asset Sentiment: BUY Speaking of backing a team, there have been a lot of changes at Talisman. Kerry Harmanis, one of Australia’s most famous and highly regarded directors has come out of retirement to joint the board as chair and is restructuring the team. He has over $12m cash at bank and is on the hunt for a WA gold project to vend in. With an EV of under $10m, and a corporate legend at the helm, I’m happy to hold and see what happens here. PERFORMANCE SUMMARY 2020 Note BGL, AUT and AQI were the only high conviction stocks reported. All picks are speculative. High conviction stocks are clearly stated on themattreport with a deep dive on reasons why. MY INVESTMENT STRATEGY I'm a value investor focusing on mid term trades. I invest primarily in ASX listed Resources, Tech & Industrials. I look for stocks with a minimum 200% upside and 20% downside. They must have a strong management team who are personally invested. I use my networks to thoroughly research the companies directors, management, reputation, their workplace culture & the quality of their product. On average, for every one hundred companies researched, I heavily invest in only one. Any company I invest in must meet all of my screening criteria. My leads come from regular analysis and professional industry contacts I've spent decades developing working in the financial services and resources sectors. So hit me up with any stocks you're liking or want an opinion on. This will be an irregular email summarising key stocks I'm considering (or in some cases, not liking) and a summary of why. As well as the occasional deep dive or alert report on a stock I'm investing heavily in. At the end of each email is a performance summary of all stocks I buy and how they are tracking, with my lowest entry price and highest exit price (note there may be buying and selling along the way in between!) If you have friends that are keen to join in (subscribe here). I'm not a financial advisor so please only pass on to 708 investors. Enjoy! Matt Hayes is the Director ofGeronimo Executive Search, providing head hunting services within the West Australian resources sector. He has been an avid investor in the ASX since 2005. He was founding CEO ofRaisebook; online capital raising platform for resources and technology stocks. He is also an artist, and co-owner ofKing SommWine Bar. Note: This report is for educational purposes only. While Matt Hayes, director of the Matt Report owns many of the stocks contained in the reports, he receives no brokerage fees or promotional fees for writing this content. By sharing this information and insight into how Matt invests, the purpose of this report is to connect a community of investors to interesting unsponsored and relatively unbiased opportunities (Except Matt believes in and often owns stocks covered in the report). This report IS NOT personal advice. It is very important to refer to the ASX website for information on any companies / stocks that are contained in this report and consult your financial adviser before acting. This report is for 708 investors only, Matt Hayes is not a financial advisor. update your preferencesorunsubscribe

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