Club Report: Half-Year Report 2023

Our 10 Bagger Portfolio Performance

At the end of the half-year, our 10 bagger portfolio was up by 237% on a mark-to-market basis and by 367% on a highest gain basis.

The Best Performers

Alpha Bright Digital and L1X | ABD

ABD the promising new L1X Layer One blockchain developer and the L1X tokens themselves were our best performers in H1. L1X looks to become the only fully interoperable blockchain in cryptoland which should eliminate the need for risky inter-protocol bridges. If this happens, it should attract huge usage. In addition, it is also currently both the fastest and cheapest new level 1 blockchain in existence.If the developers can pull this off with the huge anticipated volumes coming,- the sky’s the limit for where this new blockchain tech value could go.

Members helped to privately seed fund this project at around 10 cents or less per token. For the half-year report, we have valued the L1X tokens at their current successful public sale price of 50 cents. On September 1 the L1X tokens will start trading (but only via P2P trades for now). Then we should have a clearer market price to better track their value. Full open market trading of the token is not planned to start until January 1st 2024.

As subscribing members are aware, the LIX tokenomics, means seed funders, who are showing some big potential gains, will be partially escrowed and can only start selling their L1X tokens step by step each month starting at the end of January 2024 when full market trading starts.

If this new blockchain technology works even half as well under the expected huge volumes as it appears to be working today - we foresee L1X as holding the most promising long-term potential of all our 10-bagger portfolio calls.

Industrial Minerals | IND.ax

In expectation of a possible offtake announcement IND had a 90% rally in HY1 from 38 cents up to 74 cents. However, with an offtake agreement finalisation dragging on, the stock has now slipped back to its new “waiting” valuation of around 45 – 50 cents.

We remain confident that IND will obtain their first offtake agreement soon. They are the only ASX silica company with a full mine licence. They have a reasonably-sized JORC resource (and probably much more behind that) of suitable quality silica sand which, apparently, does not require huge CAPEX to beneficate it to export standards for glass.

IND continues to work on closing a suitably-priced off-take deal with several potential large customers in Asia. The glass (and hence silica sand) shortage in China continues and should only get more acute over time. So in our opinion, it’s just a matter of time before IND secures their first offtake which should allow this stock to move significantly higher.

Zeus Resources + Free Option | ZEU.ax ZEUO.ax

In February members took up much of the 1 cent ZEU rights issue stock (with a free option attached.) Then, rather unexpectedly, in May and June, ZEU and ZEUO went for an 800% rally. This appears to be due to a sudden outburst of bullishness in the lithium counters and particularly due to the nearology of ZEU’s neighbours Delta Lithium (DLI.ax) and Veris (VRS.ax) which both ran up hard on promising exploration results to market valuations way above neighbouring Zeus.

Many members were able to take advantage of this unexpected run-up with big volumes to sell some or many of their shares much higher to get to free ride in the stock. However, some rather desultory exploration results and the sudden market lithium frenzy cooling off saw prices fall back more recently.

ZEU continues to explore their highly prospective Mortimer Hills site, as well as to analyse other potentially prospective new projects. With an A$ 5 million market cap, A$ 2 million cash in the bank, and an EV of just A$3 million - we still remain very positive on the future prospects for Zeu.

New Entrants to the Portfolio

Pancontinental Energy + Free Option | PCL.ax PCLO.ax

PCL holds a promising deep ocean oil exploration block in the Atlantic, offshore from Namibia, and just to its south huge new independent finds by both Total and Shell have made the area the hottest new oil exploration area in the world.

We only started counting PCL and PCLO calls in the portfolio at the end of the half year. The committee informed members of this when we first called PCL (Jan 24, 2023), at 0.008 cents and the option at 0.004 cents May 30, 2023) - to allow members plenty of time to accumulate shares or options as cheaply as possible. So far PCL is up 140% and PCLO is up 200% from our call prices.

The big issue ahead now for PCL is whether Woodside Petroleum will formally exercise its option to agree to pay USD 57 million to cover the drilling costs. This has to be exercised before the end of September - If Woodside do exercise their option - then PCL will hold 20% - free carried and be significantly de-risked and so we expect this will allow the SP to advance considerably higher as they move towards drilling in early 2024.

SI6 Metals + Free Option | SI6.ax SI6OF.ax

Some members successfully subscribed for shortfall shares in the recent Si6 rights issue which the committee called on May 15 as having the potential to 10-bag over time. Now that the rights issue is completed and members who subscribed have got both the SI6 shares and the attached 1-for-1 free option (Si6OF) registered in their brokerage accounts, a secondary market is now established and we have just added SI6/SI6OF into the portfolio.

We expect good news flow from SI6 to start later in H2 which should hopefully let the market better understand its large and growing Ni-Cu-PGE resource in Botswana, and the highly prospective land in Brazil recently acquired by this little company with just an A$11 million (USD 7.5 mill) market cap.

We also called two other investments in H1 which shall hopefully be put in the portfolio soon. They are F and D. So far they remain private and have not yet established a secondary market in their shares as they are awaiting IPO if possible. When they do create an open market value, we shall then start officially counting them in the portfolio.

Removed From The Portfolio

Errawrra Resources | ERW.ax

Was taken out of the 10-bagger portfolio in March at 18 cents, a loss. This was done with a heavy heart due to us becoming tired of the very slow and uncommunicative management. However, based on the positive results being hit by their neighbours on all sides, we still believe ERW sits on very prospective ground for both nickel and lithium and for this reason, we would not encourage members to sell out in a great hurry. This stock can be very volatile and it jumps up and down like a yo-yo, and it could easily jump very high on any decent exploration results.

K-tig | KTG.ax

The committee also very reluctantly decided to boot KTG out of the portfolio at half-year end. This was mainly due to the bad treatment existing shareholders received in their recent cash raise - and their delays in obtaining the sought-after financing - which imply that all is not going well.

We moved KTG out of the portfolio to the “stocks we like” section because we believe that if KTG obtains its required financing it still holds huge potential with its revolutionary and disruptive welding technology. Most particularly in its drive to become a market leader in the new decommissioning industry for old nuclear plants. Plus, in the longer term, it could gain significant and lucrative market share in the massive shipbuilding, defence, hydrogen storage and general industry.

KTG’s main businesses, however, are heavily dependent on government contracts which can be painfully slow to materialise. So it is a stock to buy and put away in the bottom drawer for the long term. In the shorter term, we see better places for members to invest their money so we exited the call. \

Our Multi-bagger Portfolio

At half year Our multi-bagger portfolio was up 37% on a mark-to-market basis and 84.6% on a highest gain basis.

A Short Summary of Our Holdings

Lindian Resources | LIN.ax

This was our best performer in H1 23 moving up 136% as it continues to develop its world-class Kangankunde rare earth project in Malawi - which with reserves of 5.7 million tonnes already looks like it’s shaping up to become one of the biggest and best rare earth resources in the world.

ERW (Errawarra Resources)

We called ERW a buy in the Multibagger portfolio when it fell to a low of 7 cents in May - due to bad drill results and the market losing faith in its slow management. But, as noted above, ERW continues to hold very prospective ground in WA - and at 7 cents it was too cheap to ignore - and sure enough, by half year it had bounced back up by 130% to 18 cents as its direct neighbour to the north (AZS) pushed higher on the back of some juicy lithium finds.

CLA (Celcius Resources) - CLA is a very undervalued copper mine developer in the Philippines. It has a market cap of around A426 million and has proven reserves of copper and gold worth over A$24 billion! It moved higher in H1 based on an opportunistic buy-out bid from Siver Corp - an NYSE-listed company. Shareholders let them know they probably would not accept the low-ball offer and the CLA SP fell back down.

However, we feel that as they soon should obtain their mining licence, and as its assets at fair market value are worth closer to 16 cents a share - it should over time move higher than its current price of 1 cent per share - we continue to patiently hold CLA in the

Multibagger Portfolio

FRE (Firebrick Pharma)

FRE holds the patent to a simple Iodine nasal spray that they believe can cure the common cold. (There are estimated to be 2 billion cases of the common cold annually- so this product if it gets cleared to sell can have a potentially massive global market.) The product is currently undergoing trials in several countries.

FRE expect the results from their phase 3 trials in Australia by the end of September. If these are successful it should open up FRE to apply for the right to sell in Australia, Europe and most other countries globally. The stock has begun moving higher in expectation.

If it’s Australian trials prove successful this small A$32 mill market cap stock’s share price should move considerably higher over time.

E25 Element 25

owns the huge Butcherbird Manganese resources in WA which can be processed into high-purity manganese (HPMN) - which is possibly the single most critical material needed for EV batteries. E25 are building an HPMH processing plant in Louisiana and this year they have announced 105 million USD investments in the plant with offtake deals done with car manufacturing giants Stellantis and GM. We believe it’s only a matter of time till E25 gets the full funding and offtake agreements for the plant - Under its scoping study when the HPMN plant opens it will give E25 an NPV of USD 1.6 billion- but right now E25 is only valued at around USD 60 million!

Amazingly this year E25 has fallen on the news of the GM and Stellantis investments -which is a real head-scratcher as to why.

Either the market is discounting that they won’t raise the balance to complete the plant or it has no faith in the management. However, we believe in time it will get built and see this current low price as an excellent time to buy in.

(AEE- Aura Energy)

is developing a big low-cost shallow uranium asset in Mauritania, AEE looks to set to gain from the expected global shortage of Uranium supply which continues to drive the Uranium price higher. The company also has a huge Vandium asset in Sweden it is looking to sell for a big cash payout.

AEE fell a bit in H1 but is still up over 800% since we first called it as a potential ten-bagger in 2021- but we believe with a uranium bull market progressing again this stock could easily move above its recent high of 35 cents.

BTC (Bitcoin):

BTC Continues to gain more traction, significance and trust in the world of finance. It seems the US and other governments are accepting it is not a security, and more recently some of the biggest asset managers in the world have submitted applications to the SEC to open bitcoin ETFs. When this happens (which it eventually will) this will add to BTC’s acceptability and should produce USD billions more of buying into Bitcoin. Bitcoin however is the only completely finite resource in the world with limited supply and therefore any significant new buying should drive its price significantly higher. Plus, as we approach the next bitcoin halving in May 2024, we expect another bull run as has happened around every previous halving.

Longer term, as bitcoin is measured against fiat currencies and all fiat currencies eventually devalue to nothing through inflation and overprinting by governments - We believe the bitcoin price will continue price to move considerably higher. BTC however is still a very volatile young asset so expect a rough ride along the way.

Outlook for The Remainder of 2023

In H1 most of the world’s larger indices had a strong run-up, led by tech-heavy Nasdaq which was up by 35%. The ASX however – our main playground – only rose by 3%. After the positivity of H1, we think it is likely that second half may be fairly stagnant or even correct downwards as things consolidate.

Therefore we do not expect many more fireworks this year. However, we do see promise in the uranium and crypto sectors. Possibly AI-related stocks will continue to run bullish- but they now seem a bit overbought.

The truth is macro global factors are not our speciality - plenty of other people do that better than us. We in the committee just need to concentrate on finding, - and understanding, - a few good investments and keep closely abreast with the micro affairs and market conditions surrounding them.

Even Charlie Monger, - Warren Buffet’s long-time partner in Berkshire Hathaway, said the same recently to their shareholders -“Our job is not to keep up with every damn thing in the world, - but just to find a few intelligent things to do.”

Warren Buffet himself succinctly summarised this point when explaining their hugely successful history of investing. He said to him the two most salient points to their world-beating investment performance were:

1. Over 58 years, Berkshire Hathaway’s portfolio has made 2,419,900% in profit.
2. And he noted that most of that was made from “12 truly good investment ideas – that’s about one every five years – it just takes a few good winners to work wonders.

Moreover, Charlie Monger, added that after identifying their few good ideas – “The big money was earned not in the buying or the selling, - but in the waiting.”

Which brings us to our current 10-bagger portfolio. We believe our current 10 bagger calls individually, each has a greater than 50% chance of working and hitting our hoped-for price targets in the next 24-36 months,-or hopefully less. Having eight different opportunities with a greater than 50% chance to ten bag over time, should mean we have a good shot at getting a few winners from amongst them..

Combined together, we estimate that club members have some pretty significant stakes in these calls - so if only a few hit their hoped-for targets - or better, it could mean some pretty healthy profits for members over the coming months or years.

So far we have done much of the difficult work, - identifying some good opportunities and negotiating to get ourselves and members set into them at or near the bottom. Getting in at the bottom means downside risk should be greatly limited and upside potential should be greatly enhanced> However the downside of getting into deals so early is often that the market doesn’t yet know or understand them. So they often lack decent liquidity and can be volatile - and the businesses need time to develop. So we would agree with Charlie Monger and we suggest now is the time to just chill a bit and wait, and of course, to monitor our different 10 bagger calls progress closely and where possible try to assist their development.

Charlie Monger noted that the waiting part is also not easy. “It takes character to sit there and do nothing…” he noted, “ because someone will always be getting rich faster than you, but this is not a tragedy - just keep to your game plan.”

Meanwhile, as we wait, we continue to look for new opportunities but we are being even more picky now, as the committee is aware that many members are quite fully invested right now and really want or need to exit one or two calls with a decent win (to create new liquidity) before piling into more new calls.

We are also working at developing a separate safer higher-yield portfolio model in preparation for members hopefully exiting our current calls with significant profits. Then we can share better information about safer, higher-yielding investments in case members want to allocate some of their profits - for income- instead of just rolling the dice and going all in again on our next higher-risk calls.

Disclaimer

Please be aware that past performance is no guarantee of future performance. No financial advice given. You are encouraged to do your own research (DYOR) on the above mentioned companies and their strategy/progress and make your own financial decisions.