Analysts’ Ideas Of The Week

Table of Contents:

1. Summary

2. FRC Top Picks

3. Weekly Mining Commentary

4. Updates from Resource Companies under Coverage

5. Updates from Financial, Technology, Energy, and Special Situations Companies under Coverage

6. Weekly Crypto Commentary

7. Weekly Cannabis Commentary

8. Psychedelic Industry Performance

Summary

1. Why did global equity markets trend higher last week, despite turmoil in the financial industry?
2. Ford (NYSE: F) provides guidance on when its electric vehicle business will be profitable.
3. U.S. regulators are suing Binance; Coinbase (NASDAQ: COIN) could be their next target.
4. Shares of an ad-tech company under coverage were up 14% last week.
5. NVIDIA CTO’s (NASDAQ: NVDA) scathing comments on cryptos might hurt investor sentiment towards the sector.

FRC Top Picks

The following table shows last week’s top five performers among our Top Picks, including four junior resource companies, and a tech company. The top performer Kidoz Inc. (TSXV: KIDZ), was up 14%. KIDZ is an ad-tech company. We are expecting the company to release its 2022 financials next month. Our prior reports can be viewed here.

Companies on our Top Picks list are up 10% on average since we initiated coverage vs -31% for the benchmark (TSXV).

1. Since the earliest initiating date of companies in the list of Top Picks (as of March 27, 2023)
2. Green (blue) indicates FRC’s picks outperformed (underperformed) the benchmark.
3. Past performance is not indicative of future performance.

Our complete list of top picks (updated weekly) can be viewed here.

Weekly Mining Commentary

Last week, global equity markets were up 0.8% on average (down 1.0% in the prior week), amid dovish comments from the Fed and the Bank of England, even though both  central banks raised their benchmark rates by 0.25%. We remain positive on gold and silver, and believe that lower yields should drive equity valuations higher.

Source: FRC/Various

The US$ and metal prices were relatively flat last week. Copper prices were up 4% WoW on lower inventories.

Valuations of gold producers were up 3% last week (up 9% in the prior week); base metal producers were up 3% last week (down 5% in the prior week).

We are maintaining our metal price forecasts.  

Source: FRC

Key sector developments are listed below (positive):

 – Ford estimates that its electric vehicle business should be profitable by 2026.

 – Mitsubishi (TSE: 5711) is acquiring 5% of Western Copper and Gold (TSX: WRN) for $21M ($2.63/share), implying a 11% premium to the last closing price. WRN is advancing a copper-gold project in the Yukon. In late 2022, Mitsubishi had acquired a 15% interest in a large undeveloped nickel-cobalt project in B.C., owned by Giga Metals (TSXV: GIGA).

Updates from Resource Companies Under Coverage

FRC Opinion

Positive – Resources increased by 5%, to 140 Moz AgEq/2.3 Blbs ZnEq (indicated), and 210 Moz AgEq/3.5 Blbs ZnEq (inferred). Resources are spread across three deposits, and all three remain open at depth. We will publish an update report, with a revised fair value estimate, shortly.

FRC Opinion

Positive – Drilling to date has extended mineralization horizontally and vertically. We are expecting a maiden resource estimate this year. Neighbor American Battery Technology (OTCQX: ABML/MCAP: US$654M) recently completed a large maiden resource estimate, totaling 16 Mt lithium carbonate, grading 561 ppm lithium.

FRC Opinion

Neutral – Located in  a region well known for large copper deposits; HAN can acquire the property by spending $15M, and issuing 6M shares over seven years. The property has never been drilled.

FRC Opinion

Positive – Encouraging results from a non-core asset; a review of historic exploration data indicated  that the project has potential for hosting a large manganese resource. TN is preparing for the next phase of exploration.

FRC Opinion

Positive – 68% of inferred resources have been upgraded to M&I resources. This is a highly positive development for the company’s upcoming feasibility study, expected in late 2023. E3 holds one of the largest undeveloped lithium brine resources in the world.

Weekly Crypto Commentary

Prices of mainstream/popular cryptos were flat on average last week (up 5% in the previous week).

Source: FRC/Yahoo Finance

The global MCAP of cryptos is US$1.17T, up 10% MoM, and down 41% YoY.

Source: Coinmarketcap

Companies operating in the crypto space are trading at an average EV/R of 5.2x (previously 5.3x).

EV/R of Crypto Companies

Source: S&P Capital IQ/FRC

Source: S&P Capital IQ/FRC

Key sector developments are listed below (negative):

– According to the Canadian Anti-Fraud Centre, Canadians lost $530M from crypto scams in 2022, up 40% YoY.

– U.S. regulators are suing Binance, and its CEO for potentially violating trading rules. The regulators are also considering enforcement action against Coinbase over securities laws violations.

– The CTO of Nvidia stated that cryptos do not “bring anything useful for society”.

Weekly Cannabis Commentary

Cannabis Industry Performance

Source: FRC/Yahoo Finance

Last week, Canadian cannabis stocks outperformed their U.S. peers (6% vs -8%). Canadian stocks had underperformed in the week prior to last.

 Key sector developments are listed below (positive):

 – According to Statistics Canada, Canadian cannabis retail sales were up 14% YoY in January 2023.

 – Switzerland is planning a trial program to potentially legalize recreational cannabis.

 – New Hampshire has passed a bill allowing medical patients to grow their own plants.

Valuation

Canadian cannabis stocks are trading at a 6% premium (previously trading in line) relative to their U.S. peers.

Source: S&P Capital IQ, FRC

                                                                                       Average EV/R

Source: S&P Capital IQ, FRC

Canadian Retail Cannabis Stores

There are 3,489 retail cannabis stores in Canada, a decrease of 11 stores WoW, including one new store in B.C, 11 closures in ON, and one closure in Alberta.

                                                                                     Nationwide Store Count

Source: Provincial Websites, FRC

Source: Provincial Websites, FRC

Psychedelic Industry Performance

Psychedelic stocks were up 7% on average last week (down 7% in the previous week).

Source: TMX Money, FRC

Disclaimers and Disclosure

The opinions expressed in this report are the true opinions of the analyst(s) about any companies and industries mentioned. Any “forward looking statements” are our best estimates and opinions based upon information that is publicly available and that we believe to be correct, but we have not independently verified with respect to truth or correctness. There is no guarantee that our forecasts will materialize. Actual results will likely vary. Certain companies mentioned are covered by FRC under an issuer paid model. FRC or companies with related management, and Analysts, may hold shares/securities in some companies mentioned in this report. Distribution procedure: our reports are distributed first to our web-based subscribers on the date shown on this report then made available to delayed access users through various other channels for a limited time. To subscribe for real-time access to research, visit https://www.researchfrc.com/website/subscribe for subscription options. This report contains “forward looking” statements. Forward-looking statements regarding the Company, industry, and/or stock’s performance inherently involve risks and uncertainties that could cause actual results to differ from such forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, continued acceptance of the Company’s products/services in the marketplace; acceptance in the marketplace of the Company’s new product lines/services; competitive factors; new product/service introductions by others; technological changes; dependence on suppliers; systematic market risks and other risks discussed in the Company’s periodic report filings, including interim reports, annual reports, and annual information forms filed with the various securities regulators. By making these forward-looking statements, Fundamental Research Corp. and the analyst/author of this report undertakes no obligation to update these statements for revisions or changes after the date of this report. Fundamental Research Corp DOES NOT MAKE ANY WARRANTIES, EXPRESSED OR IMPLIED, AS TO RESULTS TO BE OBTAINED FROM USING THIS INFORMATION AND MAKES NO EXPRESS OR IMPLIED WARRANTIES OR FITNESS FOR A PARTICULAR USE. ANYONE USING THIS REPORT ASSUMES FULL RESPONSIBILITY FOR WHATEVER RESULTS THEY OBTAIN FROM WHATEVER USE THE INFORMATION WAS PUT TO. ALWAYS TALK TO YOUR FINANCIAL ADVISOR BEFORE YOU INVEST. WHETHER A STOCK SHOULD BE INCLUDED IN A PORTFOLIO DEPENDS ON ONE’S RISK TOLERANCE, OBJECTIVES, SITUATION, RETURN ON OTHER ASSETS, ETC. ONLY YOUR INVESTMENT ADVISOR WHO KNOWS YOUR UNIQUE CIRCUMSTANCES CAN MAKE A PROPER RECOMMENDATION AS TO THE MERIT OF ANY PARTICULAR SECURITY FOR INCLUSION IN YOUR PORTFOLIO. This REPORT is solely for informative purposes and is not a solicitation or an offer to buy or sell any security. It is not intended as being a complete description of the company, industry, securities or developments referred to in the material. Any forecasts contained in this report were independently prepared unless otherwise stated, and HAVE NOT BEEN endorsed by the Management of the company which is the subject of this report. Additional information is available upon request. THIS REPORT IS COPYRIGHT. YOU MAY NOT REDISTRIBUTE THIS REPORT WITHOUT OUR PERMISSION. Please give proper credit, including citing Fundamental Research Corp and/or the analyst, when quoting information from this report. The information contained in this report is intended to be viewed only in jurisdictions where it may be legally viewed and is not intended for use by any person or entity in any jurisdiction where such use would be contrary to local regulations or which would require any registration requirement within such jurisdiction.