Is Gunsynd a Banker each-way Bet for 2021
“…With the prospect of a positive news flow through 2021 from a diverse range of investments we repeat the suggestion we made when we last covered the company in December that Gunsynd may well be a horse worth backing…”
With a portfolio of holdings encompassing gold, copper, and nickel miners, betting apps for YouTube sports channels, and avant-garde Japanese whisky, the investment strategy pursued by Gunsynd Plc (AIM:GUN) offers a particularly pure example of the time honoured principle of diversification.
During a busy 2020 the company, which offers seed capital, convertible loans, straight equity, and IPO and reverse takeover management to budding enterprises, continued to widen its focus beyond its former concentration on the mining and energy sectors.
Rogue Baron: backing Japanese whisky
Gunsynd has a 28.48pc interest in Rogue Baron (AQSE:SHNJ), which has succeeded in developing a cluster of premium spirit and wine brands in the face of the unprecedented headwinds that have battered the hospitality sector through the pandemic.
Rogue Baron, admitted to the Aquis Stock Exchange earlier this month, has made particularly impressive progress with its flagship brand, Shinju Japanese Whisky. Shinju Japanese Whisky will soon be available in over a dozen states, and an update earlier this month stated that sales in the brand’s two cornerstone markets, New York and Washington DC were up 271pc and 445pc respectively since September. Another 30,000 bottles of Shinju will soon be on their way to the US after the most recent container sold out within days. The company expects demand for the six bottled cases, to increase even more rapidly as shipping channels ramp up to pre-pandemic levels and lockdown stringencies are eased.
Shinju’s increasing profile is reflected in its selection as one of Liqour.com’s top 10 Japanese whiskies, mentioned alongside established brands such as Yamazaki and Hakushu. Red Baron is aiming to nurture Shinju and its other brands which include, Copa Imperial Tequila, to position them as prime sales and buyout opportunities.
Low6: next generation app based betting
Another eyecatching Gunsynd holding is making inroads into a quite different market. Low6, into which the company sunk £200,000 last December, offers a white label betting platform which sport franchises can adapt to their own brand. The company also has made an additional investment into Low6 to the tune of £65,000 back in February.
Peter Ruse commented: “Gunsynd is delighted to increase its investment in Low6 via the extended pre-IPO capital raising. We believe Low6 is now well-funded to accelerate all of its growth aspirations across numerous B2B partnered apps and standalone apps. This segment of the market continues to attract us, as we are seeing the continued deregulation of sports betting across a number states in the USA offering a strong market backdrop.“
Preparing to list this year on the Australian Securities Exchange (ASX), in anticipation of which it has so far raised more than £8m, Low6 draws on gamification principles to encourage younger generations to a chance on the fortunes of their teams. The app, versions of which have now been rolled out to some 80,000 users, offers a ‘pooled sports betting experience’, allowing users to compare the outcome of their bets with each other.
Low6 customises the platform on behalf of clients with US software company YinzCam, which makes mobile sports and events apps for teams, leagues, events and venues in the US, Canada, Spain and Australia. The partners have recently developed customised apps for Rangers, Manchester United, Arsenal fan channels on mediums such as YouTube and Instagram.
The Rangers app, for example allows users to compete on a peer-vs-peer basis to predict the outcome of match events, including the number of goals, assists, shots on goal, and corners. Fans pit their wits not against the bookie, but other fans, competing for leaderboard position and cash prizes.
Gunsynd continues to retain substantial interests in the energy and mining sectors.
The company’s most significant interest remains its 17.34pc stake in Rincon Resources (ASX:RCR), a gold and copper exploration company focused on Western Australia. Rincon, which listed on the ASX just before Christmas following a AUD$6m raise, has 100pc interests in three highly prospective projects in Western Australia, the South Telfer, Laverton and Kiwirrkurra Projects, all scheduled for drilling this year.
The largest, the South Telfer Project, consists of six exploration licences and two prospecting licences covering approximately 540 sq km with of prospective 40 km strike geology. Rincon’s analysis of extensive historical exploration data including some 260 drill holes and more than a thousand surface assays, has identified multiple targets, the most advanced of which, the Hasties Prospect, is only 10 km south of Newcrest Mining’s (ASX:NCM) Telfer Gold Mine, which has produced 27 million ounces of gold over the past 45 years. Another 5 km gold anomaly has been identified through aircore drilling at the Westin Prospect, along strike from the Telfer trend.
The Laverton Gold Project comprises two exploration licences covering approximately 42 sq km within the Mt Margaret-Murrin Greenstone belt, where gold mineralisation of up to 7.00m @ 15.90g/t Au has been identified through historical workings and drilling.
The Kiwirrkurra Project is a single exploration licence covering 126 sq km of the Central Australian Suture in the West Arunta Province, prospective for iron oxide copper-gold style mineralisation as well as orogenic gold mineralisation, as demonstrated by recent discoveries made by the Independence Group (ASX: IGO) and Prodigy Gold (ASX:PRX).
In a February update on exploration activities at its Laverton and South Telfer Projects in Western Australia, Rincon announced that photo-geological interpretation work at the Hasties Prospect has identified seven high priority targets. Plans for geophysical surveys at South Telfer have been finalised with an airborne survey scheduled for early Q2. Heritage surveys at Hasties are also scheduled to begin in the same quarter, paving the way for a maiden drilling programme later in the year. Infill soil sampling is underway at Laverton, aiming to better define geochemical anomalies identified through previous exploration.
Other mining interests
Gunsynd retains a cluster of other resource sector interests. Eagle Mountain (ASX:EM2), also focused on copper and gold, is exploring advanced and greenfield projects in Arizona. Eagle’s Oracle Ridge and Silver Mountain Projects fall within the Laramide Arc that hosts the copper porphyry deposits mined by BHP, Rio Tinto, Freeport McMoRan and Hudbay. Recently, the world’s biggest copper trader, Trafigura says it expects the metal to hit $15,000 a tonne in the coming decade as demand from global decarbonization produces a deep market deficit.
Empress Royalty Corp (CVE:EMPR), a precious metals royalty and streaming company focused on the creation of financing solutions for mining companies, is currently negotiating opportunities to build out a $50m portfolio that will include 16 precious metal royalty and streaming investments with three near near term cash producing assets.
Gunsynd also has exposure to the growing nickel market through Pacific Nickel Mines (ASX:PNM), previously known as Malachite Resources. Demand for nickel is forecast to rise six-fold by 2030 as orders from electric vehicle makers surge: Tesla is just one of the major EV players to have voiced concerns about a possible shortage in supply of the metal over the next decade. Pacific Nickel recently acquired two advanced high-grade nickel exploration projects, Jejevo and Kolosori, located on Isabel Island within the Solomons
Having secured £2.3m through 2020 fundraisings, the Gunsynd has sufficient firepower for the foreseeable future. Its last set of results, for the year ended 31 July 2020, stated a loss for the year of £991,000 (2019: £558,000), with net assets of £2,470,000 (2019: £2,363,000) and cash balances of £838,000 (2019: £568,000).
Anglo Saxony Mining
Last week, Gunsynd announced that it had invested £125,000 in Anglo Saxony Mining Limited (“ASM”), a public unlisted tin development and exploration company.
ASM plans to establish sustainable tin production and processing from the Tellerhäuser Mine in Saxony, Germany. The Tellerhäuser Mine has a 50-year mining licence granted in 2020 with final permitting well advanced. The local Erzgebirge area has 800 years of mining history, including the world’s oldest School of Mines. The Tellerhäuser mine comes with 150,000m of tunnels and other underground development, approx. 140,000m of historical drilling and 3,000m of channel sampling from past owners of the project. ASM has ambitions to become a sustainable tin producer from a zero-waste mine by carrying out all of its processing and waste to be located in underground voids. The waste material will be stored and treated via water treatment facility in-situ and pumped to a nearby storage plant.
Peter Ruse, commented: “Gunsynd is pleased to have the opportunity to participate in the financing for ASM – an exciting tin development opportunity in Western Europe. Tin as a commodity has caught the market’s attention since late 2020, with prices rising quickly on the back of a fundamental supply-demand mismatch coming out of the COVID-19 pandemic. The Tellerhäuser deposit benefits from extensive mine infrastructure from past investment and exploration expenditure. The deposit sits on the doorstep of numerous German and Austrian tin and zinc smelters in a region with 800 years of active mining operations.”
An each-way bet
With its holdings in gold, copper, nickel and tin the company seems well set to benefit from the expected upturn in the commodities sector, which we discussed last month.
But as Gunsynd’s year end report put it, commodities are ‘far from a one way bet’. Quoting Warren Buffet’s maxim – ‘Be fearful when others are greedy, and greedy when others are fearful’ – the company seeks value in sectors that might have been overlooked in the rush to growth, a philosophy further signalled by its name, taken from the grey stallion that dominated Australian horse racing during the early 1970s, remembered for ‘a tenacity when running that served to take the victory when other horses pulled up as beaten’.
Gunsynd’s share price has doubled over the past few months, taking the company’s market cap to £8m. But it is still no more than 2p. With the prospect of a positive news flow through 2021 from a diverse range of investments we repeat the suggestion we made when we last covered the company in December that Gunsynd may well be a horse worth backing.