Here's why these 3 small caps could be odds-on winners

Here's what you need to know about the latest developments at ABM Resources NL (ASX:ABU), Kip McGrath Education Centres Limited (ASX:KME), and Australian Bauxite Ltd (ASX:ABX).

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

If you're looking at small and micro-cap stocks, you're taking on extra risk in return for extra reward potential.

If you're doing it right, you're finding out as much information as you possibly can before making a decision, and then you're looking continuously for news which could prove or disprove your initial investing thesis.

All three companies in today's article have recently released very important market-sensitive announcements, which means it's time for a quick run through to see if your investment thesis still holds.

ABM Resources NL (ASX: ABU) revealed today that it has signed an option with Ord River Resources Ltd (ASX: ORD) over its Suplejack Project which is just 25km north-west of ABM's existing Hyperion field.

An initial Inferred Resource assessment (conducted by Ord and unverified by ABM) estimates the field contains roughly 202,000 ounces of gold at an average grade of 2.11g/t.

In return for an initial $100,000 option fee and $200,000 on expenditure over the next 18 months, ABM gains the right to farm-in and joint-venture the field with Ord River Resources. Should ABM decide to participate in a joint venture, $300,000 further expenditure on exploration over the next two years will gain ABM a 70% interest in the project.

Given that the field is right next door to ABM's existing Hyperion resource and within close trucking distance to the company's Coyote crushing operations, the agreement is an excellent investment in ABM's future for a very low cost.

Initial rich drilling results also provide substantial promise for expanding the resource in time.

Australian Bauxite Ltd (ASX: ABX)

Australian Bauxite recently signed a funding agreement with Noble Resources that was met with mixed reaction from the market, initially sending the shares up to 52-week highs of 35c before settling at $0.29c per share.

The agreement sees Australian Bauxite granted a total of $8 million in finance at 8.75% interest by Noble with ABX's Tasmanian assets held as security.

Approximately $6 million will be used to commence mining in Tasmania, with $2 million available for future expansion if necessary.

In addition, Noble will purchase 50% of the Tasmanian product at an unspecified fixed price, and be entitled to a 2.5% royalty on the 50% it doesn't purchase for the first four years.

It's a pretty tough agreement in the circumstances, with Australian Bauxite perhaps disadvantaged in the negotiations by its explorer status. However the 'purchase offtake agreement' with Noble also provides some price certainty should the market move adversely.

Thankfully for nervous shareholders the agreement only covers the company's Tasmanian assets, although Noble also has a right of first refusal to fund future financing agreements with ABX.

In summary, Australian Bauxite still looks to be a buy at its current price, and in fact I added more to my holdings after the announcement last week.

Kip McGrath Education Centres Limited (ASX: KME)

Met with surprisingly little fanfare, today's announcement regarding the successful completion of a 12-month trial of KipOnline is great news for investors.

Online increasingly looks to be the future of everything, including education, and approximately 180 Kip McGrath centres will be offering the company's new online initiative as of this month.

CEO Storm McGrath believes that the online program will increase student engagement and motivation, while also engaging parents better through 'live' real-time feedback after class.

Parents want the best for their children, and improved engagement, focus, and motivation are big plusses to continued spending on a child's education.

The ability to involve parents further through feedback should not be underestimated either, as it is likely to lead to better outcomes for parents, students, teachers, and ultimately shareholders.

There's a lot more to investing in your future than just a good education…

Motley Fool contributor Sean O'Neill owns shares in ABM Resources NL and Australian Bauxite Ltd.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »