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What Drove Andromeda Metals To Rally 25% Over The Past Week?

Stuart Lucy

Stuart Lucy is an Investment Specialist at the Australian Stock Report, and has gained exposure to funds management and investment banking throughout his career. He draws on this experience to provide macroeconomic commentary and actionable investment insights to clients. Stuart is responsible for writing reports, is involved in delivering Macrovue webinars and provides general advice to our members on portfolio construction. Stuart currently holds RG146 General and Securities qualifications.

The market responded positively to recent news around a joint venture between Andromeda Metals (ASX: ADN) and Evolution Mining (ASX: EVN), which will lead to their project proceeding to its second stage. Since Andromeda is an exploration phase mining company, anything which brings production phase closer will be treated positively by investors. A further reason why investors reacted positively to the announcement is that Evolution has committed an additional $4m to acquire 80% of the project. While this is a large percentage, it does signal that the project is valuable enough to continue development activity, which is what the market is excited about.

Andromeda Metals - Report
Andromeda Metals is up 25% over the past week (Credit: Small Caps)

Andromeda aims to become a leading global supplier of high grade halloysite-kaolin, a rare blend of two chemicals. The reason why they have concentrated on this unusual compound is because it has a wide variety of industrial uses, which continue to expand as the body of scientific research grows. The compound can be used for the production of porcelain, but there is larger demand for fluid catalytic cracking, a complex but essential process in oil production. There are also opportunities to use the technology in nanotechnology, which a number of researchers outside the company are looking into. Some of the potential applications include water purification, batteries, and capturing CO2. A further opportunity for the business is developing high purity alumina, which is sold to industrial producers at high prices.

This makes the share price dependent on two main things, these being mine development and the development of technology around their main commodity. Both factors offer the prospect of significant share price appreciation if realised and cause a several fold rally in the share price. Nevertheless, it also complicates the downside risk, which investors will need to be mindful of when investing in the business.

 


 

Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)

(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

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