It's not very often that an initial public offering (IPO) on the ASX creates as much of a stir as Vulcan Energy's spinoff, Kuniko Limited kni, which sought (and succeeded) raising $7.8m in late August 2021, and a meagre price of 0.20c per share.

Indeed, for the most part, it is not unusual for many IPOs destined for the ASX to struggle to generate enough interest to list. Those who keep a close eye on our upcoming IPOs page know that they're routinely pushed back weeks or months at a time, and occasionally canceled.

Kuniko paints a different picture. Just take a look at the price chart on this page. With an IPO price of 0.20c, which is common for many start-up miners that aren't established, there was quite the shock when it was bouncing around the $1.00 mark on 24 and 25 August 2021. When it increased over 300% in the days thereafter, it is no exaggeration to say that Kuniko's price chart resembled a steep mountain.

For some, however, it was unsurprising. The AFR's article dated 26 August 2021, ‘Pump and dump’ group targets IPO rocket Kuniko, reported that S3 Consortium, trading under the 'StocksDigital' banner was allotted 1.875m shares at the 0.20c IPO price. Those shares were allotted in return for StocksDigital's digital marketing services. In other words, to promote the IPO and Kuniko's listing.

Kuniko's Selling Point

So was it just marketed well, or is Kuniko's current share price a true reflection of its potential? Kuniko is a Vulcan spinoff. For those unaware, Vulcan is a 'zero carbon' mineral exploration company based in Europe, with a focus on lithium. Kuniko could be considered the nickel, copper, and cobalt version of Vulcan - essentially its younger sibling.

A zero-carbon mineral exploration company sounds great. But what does it actually do? Let's take a look at the prospectus Kuniko released to the market prior to its IPO, to try and answer common questions that retail investor might have.

What does Kuniko do?

Mr Gavin Rezos, Executive Chairman of Kuniko, says that Kuniko's focus will be exploration activities on a 262km² 'Ni-Co-Cu' portfolio (being a nickel, cobalt, and copper), the metals of which are typically used in manufacture lithium-based batteries, the primary sought resource of its older sibling, Vulcan. The Ni-Co-Cu exploration will primarily take place in Scandinavia.

Does it mine?

No, Kuniko is not actively mining any licensed areas or tenements. It currently describes itself as an exploration company. The company's business model includes 'focus on mineral exploration and other resource opportunities', it will 'pursue acquisitions', and 'provide working capital for the Company'.

Kuniko has budgeted $4.15m for exploration activities related to its exploration projects (primarily based in Norway), for the next two years. Those funds will pay for field studies, geochemical surveys, drilling, and other related activities.

Where does that leave the other $3.5m? The answer can be found at page 35 of the prospectus, being the cost of the IPO and corporate administrations costs, and unallocated working capital.

How good are its licensed areas?

That's hard to say and is perhaps better left to experts in such an area.

Will Kuniko pay a dividend in FY22 or FY23?

At present, that appears highly unlikely.

Will Kuniko make a profit in FY22?

Again, highly unlikely. For the next two years, it appears that Kuniko will remain in the exploration phase. For that reason, KNI's future potential largely remains speculative. Over the past three operating years, Kuniko has reported losses of $112,964, $202,507, and $252,950 respectively.

It can be noted that these losses have been incurred with lower cash reserves than what it currently has in its purse, with the majority of those funds being provided to it by Vulcan. If Kuniko's exploration activities yield results, it would likely need to undertake a capital raising before it could commence production. Its current cash reserves are unlikely to sustain the investment of any production phase.

Is Kuniko overpriced?

Only you can be the judge of that. To us, it seems Kuniko's value is not found within its mining activities (or lack thereof), or indeed, even its exploration activities, or the potential of its licensed areas. The value remains more so in its 'zero-carbon' activities, which presumably, many other companies will see benefit from as a result of carbon offset credits, contributing to their bottom lines.

Just take a look at Vulcan vul. It's yet to supply any lithium spodumene, and yet, at the time of this article, is valued in excess of $1.5b. Then there's Core Lithium cxo, who some argue is closer to production than others, which is valued at a relatively minor $500m.

Yet, a lot of people seem to forget that Kuniko is not a lithium explorer or miner.

Perhaps there's more to the ASX-based lithium miners (or those related) than the product they're trying to sell.