Interactive Investor

Small-cap mining share tips for 2023

28th December 2022 15:24

Lee Wild from interactive investor

Mining analyst John Meyer explains what’s been affecting share prices in the small-cap mining sector and names his top picks for the year ahead.

Lee Wild, head of equity strategy, interactive investor: Hello. With me today, I’m lucky to have John Meyer, mining analyst and broker at SP Angel. Hello, John.  

John Meyer, mining analyst, SP Angel: Hello.

Lee: John, it’s been a great year for small-cap oil and gas shares who dominate the list of top performers in 2022, but there are a bunch of mining companies that have returned over 50%. What’s the outlook for small-cap miners in 2023, and which ones are your favourites to do well?

John: The small-cap miners were having a reasonably good year until the summer came along and everything got bashed lower. A lot of that, in my mind, was down to liquidity. Funds were worried about lack of liquidity following the Woodford Crisis, and therefore were very careful about this. And in fact, in the summer, when liquidity normally falls, I think the short sellers were around having their fun, taking advantage of anything that was liquid enough to short sell. Particularly with the development of such an uncertain economy following Russia’s invasion of Ukraine, and the very high energy prices, the very high inflation, and the rising interest rate outlook that we were in at the time.

Now that all that is pulling back, now that Russia is being pushed back out of Ukraine, now that the US is likely to slow its pace of interest rate rises, the same with the Bank of England and the ECB, now that the US dollar is likely to start to weaken again, I think we’re going to see a resurgence in the valuations of these companies. In the meantime, they’ve all been busy beavering away, adding value to what they’re doing, especially the battery metals boys. And some of those companies that were perhaps in other areas which were less loved have now moved into areas that investors are a bit more interested in. So I’d certainly look forward to the lithium companies, the copper companies, the other guys who are involved with any form of battery based metal or battery material, to have a good year.

Lee: Are there any that you could share with us, your favourites for 2023?

John: Ah, well, there’s a question. Yes, I think copper explorers in Zambia are a favourite of ours, if you look at Arc Minerals Ltd (LSE:ARCM). Or if you look at Anglo Asian Mining (LSE:AAZ), which is mining copper and gold in Azerbaijan, there’s quite a suite. Or Bushveld Minerals Ltd (LSE:BMN), which is busy producing vanadium in South Africa, and whilst that’s a slightly challenging business, I think what we’ll do well is the development of the vanadium redox battery business that they are helping to develop right now, so there’s a lot going on for those guys.

If I think about where I would put my own money, Bluejay Mining (LSE:JAY), which has an ilmenite project on the coast of Greenland. Rambler Metals and Mining (LSE:RMM), which is currently suspended pending a restructuring of its debt, when that comes back, I would expect that to – that valuation to rise quite markedly. So these are places where I’m personally invested, and where I’m quite excited to see new prospects or new value going forwards.

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