Plenty of bullets in this GUN
“…As a small fund with its ear to the ground Gunsynd may offer one option for gaining exposure to promising microcaps that have just listed, or intriguing start-ups that have yet to do so…”
Gunsynd Plc (AIM:GUN) is a small investment fund with a big reach. The £4.6m market cap company has interests in gold, copper, nickel, and tin miners positioned to contribute to the supply of metals necessary for the energy transition, and stakes in ventures encompassing avant-garde Japanese whisky, YouTube sports channels, and treatments for mental health.
The company, which offers seed capital, convertible loans, straight equity, and IPO and reverse takeover management to promising enterprises, looks for first movers in emergent and established markets. It is led by Executive Chairman Hamish Harris, who brings a background in risk management at finance houses including Nomura Group, Deutsche Bank AG and BZW plc, and mining and exploration sector veterans Executive Director Donald Strang and Non-Executive Director Peter Ruse. Since we last wrote about Gunsynd this spring its core investments have been active, and the company has extended its portfolio further.
Rincon Resources
Gunsynd’s most significant interest remains its 17.34pc holding in Rincon Resources (ASX:RCR), a gold and copper exploration company focused on Western Australia. Rincon, which listed on the Australian Stock Exchange (ASX) late last year following a AUD$6m raise, has 100pc interests in three prospective projects in the state: South Telfer, Kiwirrkurra, and Laverton.
The largest, South Telfer, consists of six exploration licences and two prospecting licences covering approximately 540km2, with a prospective 40km strike geology. A maiden drilling programme got underway this year at South Telfer’s Hasties Prospect, just 10km south of Newcrest Mining’s Telfer Gold Mine, which has produced 27 million ounces of gold over the past 45 years.
The first phase of the 27 hole (4,944m) programme, designed to confirm historical drilling results completed over 20 years ago by Newcrest, and test for extensions to known shallow copper-gold mineralisation, concluded last month, reporting high-grades zones up to 17.4g/t gold and 5.31pc copper with mineralisation open in all directions. A second phase, scheduled to begin this month, will test the depth of the new regions of mineralisation, and one new target.
Last month Rincon reported that a review of geophysical, geological, surface geochemistry and historical drilling data at the Kiwirrkurra Copper-Gold Project, an exploration licence covering 126km2 of the Central Australian Suture in the West Arunta Province, had identified 13 priority targets. A maiden 3,000m diamond drilling programme to test two high-priority Iron-Oxide-Copper-Gold targets is planned for H1 2022. The third prospect, the Laverton Gold Project, comprises two exploration licences covering approximately 42km2 within the Mt Margaret-Murrin Greenstone belt, where gold mineralisation of up to 7m at 15.90g/t gold has been identified through historical workings and drilling.
Eagle Mountain
Gunsynd has a significant interest in another copper and gold miner, Eagle Mountain (ASX:EM2), focused on the Oracle Ridge and Silver Mountain Projects in Arizona, situated within the compass of the Laramide Arc which hosts the copper porphyry deposits mined by BHP, Rio Tinto, Freeport McMoRan and Hudbay. Late last year Eagle reported a JORC Mineral Resource Estimate at Oracle Ridge of 12.2Mt at 1.51% copper, 16.3g/t silver and 0.19g/t gold for 184kt copper, 6.4Moz silver and 73koz of gold.
A review this year of accumulated drill core, underground formations and assay data concluded the central and southern part of the Oracle Ridge mine area is prospective for additional copper-rich mineralisation. Several pads have been recently established and roads refurbished to facilitate better access to the area for anticipated operations.
Rogue Baron
Gunsynd’s third major holding is quite different, a 25pc stake in Rogue Baron (AQSE:SHNJ) (OTCQB:SHNJF), an emerging premium spirit and wine brand. Admitted to the Aquis Stock Exchange and OTCQB Venture Market earlier this year, Red Baron has made impressive progress with its flagship brand, Shinju Japanese Whisky.
Sales rose 57pc last year despite lockdowns in its core US market, and this year Shinju has pushed into seven new US markets, Texas, Georgia, Nevada, Illinois, Colorado, Kansas, and Ohio. The whisky is now available to 60pc of the country’s population. Red Baron is on track to exceed its goal of selling 5,000 cases this year, and has set a target for more than 10,000 cases next year. The brand’s launch into the UK market this quarter will promote Shinju’s first vintage offering, an 8-year old ‘black pearl’ expression. The company, which is planning to launch a second brand next year, aspires to emulate the BrewDog model, which has built a $2bn brand and a network of 100 pubs and restaurants. Last month Shinju was voted best whisky at the 2021 Sante’ International Spirit Competition winning double goal with a perfect score of 100 and awarded a Silver Medal at the 2021 Fifty Best World Whisky awards.
Charger Metals, Anglo Saxony Mining and Pacific Nickel Mines
Gunsynd is accumulating a growing cluster of smaller investments. Earlier this year the company increased its exposure to the battery metals mega trend, acquiring a 7.14pc interest worth £218,000 in Charger Metals Limited, an Australian base metals and lithium exploration company which holds the rights to three prospects in Western Australia and the Northern Territory.
It also took a £125,000 stake in Anglo Saxony Mining Limited, an unlisted tin development and exploration company with plans to establish sustainable tin production and processing from the Tellerhäuser Mine in Saxony, Germany. The mine is furnished with an extensive infrastructure from past investment and exploration expenditure, with 150,000m of tunnels and other underground development, approximately 140,000m of historical drilling and 3,000m of channel sampling from past owners of the project. Surging demand for copper has sparked a corresponding interest in tin, which is often used as a copper alloy.
Gunsynd has an interest a third in-demand metal through its holding in Pacific Nickel Mines (ASX:PNM), which has 80pc interests in two nickel projects, the Kolosori Project and the Jejevo Project, both located on Isabel Island in the Solomon Islands. Pacific is undertaking feasibility studies in respect of both projects which have a collective JORC mineral resource estimate of 21.7 million tonnes at 1.35pc nickel, and has recently applied for a mining lease for the Kolosori Project with plans to apply for a mining lease for Jejevo next year. Pacific Nickel’s share price has increased dramatically to recently hit AUD0.16 compared with a 52 week low of AUD 0.036.
Low6
The rest of the company’s portfolio comprises an eclectic set of holdings well away from the natural resources sector. It has a £265,000 investment in Low6, developer of a white label betting platform which sport franchises can adapt to their own brand. 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 developed customised appsfor 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.
DiscovOre and Media Tech
This April Gunsynd invested £200,000 in DiscovOre plc (AQSE:ORE), which invests in potential treatments for mental health issues, including drug-resistant depression, anxiety, addiction, and post-traumatic stress disorder. It invested another £50,000 the same month into Media Tech SPAC PLC a public unlisted special purpose acquisition company (SPAC) formed to acquire companies within the media and technology space. Media Tech ‘is focused on the key areas at the convergence of new economic and content models that address the delivery of digital services to consumers, e-commerce, new media and immersive experiences’.
Seeking the spark
Gunsynd’s share price has subsided this year as its investments have reported steady rather than spectacular progress, drifting down from a January high of 2.35p to 1.03p at the time of writing. The fund has positioned itself to take advantage of mega trends, with stakes in high flying transition metals, the video gaming industry, and the evolving mental health sector. There is also the intriguing investment in Red Baron.
But all of the company’s holdings seem rather slow burners. One of them needs to ignite to spark Gunsynd’s share price. Though the company has broadened its focus beyond the natural resources sector it would seem that a development at Rincon Resources or Eagle Mountain would be the most likely catalyst to spur investor interest. Both have ongoing programmes and further updates to report.
One notable feature of the last six months or so has been the disconnect between base metal prices and the share price of small cap resources companies. With tin inventories at their lowest levels in 32 years, Shanghai copper warehouse stock at the lowest levels since June 2009 and the Nickel price up almost 59% since January 2000 one has to wonder how much longer this can persist. In addition the U.K.’s consumer prices index surged by 3.2% in the 12 months to August, the largest ever month-on-month increase since records began in Jan. 1997. With inflation traditionally showing strong correlation with commodities prices this should also be positive for Gunsynds natural resources investments.
There has been much coverage lately of an investor turn to private equity, as the strong run enjoyed by shares through much of the year has begun to stutter. As a small fund with its ear to the ground Gunsynd may offer one option for gaining exposure to promising microcaps that have just listed, or intriguing start-ups that have yet to do so.
