The CEOs of small tech companies generally are peeved about public markets right now.
Good news has tended to be stonewalled, or worse.
Australian CEOs think they should relocate with their marketing teams to North America. But the leaders of Canadian-listed firms are not so sure about the best avenues to present their stories.
California tech M&A advisor Corum Group says US public markets ended 2022 at a low, “slipping into bear market territory”, with the S&P, Nasdaq and Dow indices down 36%, 33% and 9%, respectively, for the year. “The good news is that every bear market has an end which brings along a stronger bull market (!),” Corum proffered. “It’s also worth noting that, unlike in previous years, 2022’s public markets value outperformed growth.”
The backdrop, in the mining tech space at least, has been positively glowing in recent years with private-company valuations going through the roof and the financing tide rising. There were about a dozen more equity financings of note in the works at the time of writing. Strong suitor balance sheets and still-favourable terms on offer for exits make further M&A likely, though stocks of frontline targets have been thinned.
And new, large, active investors are looking for opportunities.
Still, the share prices of Australian firms such as SensOre, RPMGlobal and K2fly have generally remained in a funk, while over in Toronto, the likes of MineHub Technologies, EarthLabs (ex-Goldspot Discoveries) and Minerva Intelligence have fared about the same.
Experienced senior mining executive Richard Taylor, who started Australian-based mineral exploration technology company SensOre in 2019, told InvestMETS.com: “There’s a lot more appetite for mining tech and it’s actually growing into a recognised market sector.
“There are funds that see a lot of opportunity. Some are investing publicly; most are investing privately. But you have to go and find them.
“Probably the most valuable lesson I’ve learned is that there is deep funding for [mining tech]; you have to go looking for it, and they specialise in investing in that area.”
While it has a comparatively large and vibrant listed METS (mining equipment, technology and services) market, the Australian Securities Exchange, or ASX, generally hasn’t been a happy hunting ground for mining tech firms.
Taylor says: “A lot of Australians will invest in the mining and exploration sector but not the tech sector. There just isn’t the depth of capital markets here.
“I think Australia’s got great technology. I just see all of it migrating in one form or the other to the US.
“There’s a few companies that are listed that give mums and dads and retail investors exposure to mining technology or industrial technology. But there’s not enough of us to create a market for that in Australia, or a deep understanding of it, particularly when so many of our best and brightest companies end up moving offshore.”
Nic Pollock, another industry veteran and current CEO of K2fly, says: “Stockbrokers like to talk in telephone-book numbers because they read all these stories about Amazon and Microsoft and Tesla and they get sort of caught up in that.
“They don’t understand there’s a lot of good small businesses out there, not just unicorns.
“Twelve-to-18 months ago the market was [saying], there’s tonnes of money, just go and do what you need to do and spend the money; you can just keep coming back to the well as long as you’re growing. But now that’s all changed. Now it’s all about breakeven.
“There’s the notion that the market is all-knowing and that everybody should be cashflow breakeven. But when you’re building an enterprise software company that addresses big market issues that takes time and just because the market sentiment is that everybody should be break even, it doesn’t mean that’s the right thing for K2fly to do at this moment.”
MineHub CEO Arnoud Star-Busman says North American investors can be little more discerning.
“We’re still living in very difficult markets, right,” he says.
“It’s sometimes soul destroying … because you put out good news and the share price goes down. Maybe there is a bit of, buy the rumour, sell the news. I think it’s more a matter of low liquidity.
“Back in November it would only take somebody selling 5000 shares to ruin my weekend.
“So I think it’s the liquidity and it’s the knowledge in the market of what we’re doing.
“We’ve tried to not make it purely mining tech. It’s more supply chain technology – logistics technology – because it can apply everywhere. It’s just, for good or bad reasons, or by accident, we chose mining and metals as a go-to market sector. Partly because I was working on some of the bigger projects and commodities … and building platforms for those.
“[MineHub stock] is being held by some pretty good institutions. We’ve got a good shareholder base but I probably need to work more on the retail market.
“Then again, I’m not sure whether that’s our market at this stage.”
Microcap malaise returns
Australian microcap fund manager Perennial Partners says the local market returned to a “pessimistic and glass half empty approach” in February, which in the context of continuing interest rate rises made sense at an index level “but less so for those companies reporting strong fundamental improvements”.
Naturally that included stocks in its portfolio.
RPMGlobal fell despite confirming full year NPAT guidance of A$14.2 million, up from $3.5m in the previous corresponding period, “which was already beaten with a half year result of $5.3m”.
“The market may have focused on a write back of $0.7m which is included in the guidance, however, they have missed that more valuable software sales also now make up a higher proportion of earnings and subscription wins to date significantly de-risk what is required for the full year.”
RPMGlobal, which has a current market value around A$320 million, is one of the few significant mining software vendors left undisturbed on the dance floor after private peers such as Deswik, Micromine and Seequent (and a host of smaller firms) were picked off by large international firms in recent times.
The world’s biggest private mining software company, Australia’s Maptek, has also remained ‘independent’ despite receiving its share of proposals.
talpasolutions raises US$16m
Germany’s talpasolutions GmbH has raised more than US$16 million (€15 million) in a series B funding round to expand its heavy vehicle fleet management technology offering and move beyond mining into construction and logistics.
Essen-based talpasolutions, established in 2016, has reportedly connected more than 450 machines in mines, quarries and distributed sites on five continents to its cloud-based software-as-a-Service (SaaS) platform, which “currently processes more data points per second than the German stock exchange”, according to the company.
Users can monitor equipment in real-time and save time and money through detailed diagnostics, predictions and alerts.
“Since the foundation of the company, we have been using our deep know-how in data science and mining engineering to create an ecosystem that brings all stakeholders to the table: fleet operators, machine and component manufacturers,” said talpasolutions CEO and co-founder, Sebastian Kowitz.
MIG Capital led the new funding round. New investors included Robert Bosch Venture Capital, Hannover Digital Investments and New York-based Prospect Mining Studio/newlab Ventures.
Existing investors High-Tech Grunderfonds, Grunderfonds Ruhr, NRW.BANK, RAG Stiftung and F-LOG Venture participated in the financing.
“Heavy industry is at a tipping point towards a data-driven future, and we believe talpasolutions is well positioned to become a major player in this transformation,” MIG Capital principal Frederick Michna said.
Electra extends black mass recycling project
TSXV-listed Electra Battery Materials Corp says it is extending North America’s first “plant-scale” black mass recycling campaign to the middle of the year after recovering lithium, nickel, cobalt, copper, manganese and graphite from shredded lithium-ion batteries during the March quarter.
“Recovering lithium from black mass represents a potential game changer for Electra and the North American EV supply chain,” Electra CEO Trent Mell has said.
“Recycling lithium from expired batteries through hydrometallurgy lowers the carbon footprint of manufacturing electric vehicles and represents an important source of future supply for a commodity whose demand is expected to grow significantly in the coming years.
“From Electra’s perspective, it considerably strengthens the economics of our battery recycling strategy by providing another high-value product we can sell.”
Electra says there could be up to 250,000 tonnes of lithium-ion batteries available for recycling from manufacturing scrap in North America alone by 2025.
The company, formerly known as First Cobalt Corp, last month produced a mixed hydroxide precipitate (MHP) containing nickel and cobalt grades above quoted market specifications. It said recoveries in the MHP circuit, which yielded the highest value product in the black mass recycling process, were equivalent to and at times better than bench-scale results achieved previously.
It was expecting to send an initial shipment of MHP to downstream users for evaluation early in the current quarter.
Electra has been processing material in batch mode since starting the black mass demonstration plant at the end of December last year. It says it will produce more than its originally planned 75 tonnes of recovered materials.
The company has been hit by procurement issues, delivery of damaged equipment and inflation in its attempts to build a US$105 million refinery complex near tiny North Cobalt, about 600km north of Toronto in Ontario. Management says the capital cost “will be higher than the $105 million budget previously disclosed”. About $71m was spent on construction in 2022.
“Pending completion of the black mass trial and evaluation of project economics expected in Q2, success could pave the way towards commercialisation,” Electra says.
“Using the existing refinery footprint, infrastructure and plant equipment, Electra could quickly expand throughput to 2500 tonnes per year of black mass under a continuous operation scenario.
“A desktop study is underway, and results will be shared once available. A larger facility of 5000t or more per annum of black mass is another option Electra may consider with a commercial funding partner.”
The company also signed a three-year agreement in Q1 to supply 7000t of battery-grade cobalt to LG Energy Solution.
