The last couple of years have been a nightmare for small-cap ASX shares, with the S&P/ASX Small Ordinaries (ASX: XSO) falling 27.8% since November 2021.
This year has been especially painful as many large-cap stocks went on a bull run in the first half of the year. No such party got going for their smaller cousins, with the small ords now hovering 14.6% lower than its February peak.
The theory is that during troubled economic times money moves to the big names because they have pricing power and market dominance that can withstand reduced demand.
So when you see a particular small-cap stock hitting all-time highs in this environment, you need to at least examine what's happening.
A new deal with a huge US client
Chrysos Corporation Ltd (ASX: C79) bravely listed in May last year in the midst of stock market carnage, as interest rates started heading up and Russia stampeded into Ukraine.
It's best described as a mining tech company.
"Chrysos has developed equipment for miners to assess the gold, silver, copper and other mineral content of their production," Shaw and Partners portfolio manager James Gerrish said on Market Matters.
"Their PhotonAssay product is a safer and more efficient method of determining assay results compared to traditional fire assay methods and their technology has started to see significant adoption in the mining industry."
The last two days the stock has been setting all-time highs because of a new agreement with US giant Barrick Gold Corp (NYSE: GOLD).
"Barrick is already using a number of PhotonAssay units at their assets, with the new deal covering 3 additional units in the USA with the option to add a further 10 units to the Barrick stable."
The small cap set to power ahead
The $456 million company also released a quarterly update last week that showed business is booming.
"22 units were deployed at the end of the period, up from 12 a year prior, while a further 4 were in transit.
"The company is targeting at least 38 units to be deployed by the end of FY24. Revenue was up 73%, though the utilisation rate was still only at ~60%."
Like many small-cap startups, Chrysos is burning cash — this showed in its $21.5 million negative cash flow during the last quarter.
But Gerrish's team is bullish, because its technology seems to be unique.
"Overall, Chrysos looks to have a great product that is set to disrupt the mining services industry," he said.
"Adoption rates and a trend towards profitability will be key to seeing shares higher from here, but this is a company on our radar."
