Pathfinder Small Cap Quarterly Report
SEPTEMBER 30, 2025
The Pathfinder Small Cap mandates invest in high-torque, early-stage companies that have the potential to generate superior returns.
Pathfinder Partners’ Fund
The Partners’ Fund had a net return of +3.2% in the third quarter of 2025. This compares to the TSX Venture Exchange which had a return of +29.2% in the third quarter. Our annualized 10-year return is +15.7% compared to the TSX Venture Exchange’s return of +6.1% over the same period. The table below provides the performance summary.
Our top contributors for the quarter were NameSilo Technologies Corp. (TSXv:URL) and Abaxx Technologies Inc. (NEO:ABXX). Our main detractors were Mereo BioPharma Group Plc. (NYSE:MREO), Imaflex Inc. (TSXv:IFX) and Nanalysis Scientific Corp. (TSXv:NSCI).
The stock market had strong performance during the quarter as speculative activity increased across the board. Artificial Intelligence remained the dominant investment theme, inspiring a wave of enthusiasm that spilled over into robotics, quantum computing, and small modular nuclear reactor stocks. The return of meme stocks and SPACs exemplified the increase in risk appetite and retail investor exuberance.
In the Partners’ Fund, we are taking a cautious approach and are focused on reducing risk by building up a bit of cash, diversifying the portfolio, and focusing on higher quality companies. Several of our new investments during the quarter were in structured products that have risk mitigation features, yet retain upside, such as debt with bonus shares or debentures in private companies that convert at a discount to the go-public price. We continued to be active in building our ‘farm team’, a portfolio of emerging investment ideas. If there is a market downturn or any macroeconomic or company-specific event to increase our confidence level in any of these companies, we can look to this group to deploy capital and make new buys. We would also consider buying back positions we have trimmed on price appreciation to rebalance and diversify the portfolio.
We’d like to introduce a position we have been accumulating over the past several years, LibertyStream Infrastructure Partners (TSX.v:LIB) – a technology company developing Direct Lithium Extraction (DLE) solutions for oilfield brines in the Delaware Basin. The majority of global lithium is extracted from brine ponds and open-pit mines in Australia, South America, and China. 70% of all battery grade lithium, notably used in the cathode in electric vehicles, is refined in China. DLE technology would provide North America an opportunity to onshore production and refining to lessen their reliance on China.
In the Permian Basin, every barrel of oil produced generates 5–10 barrels of water requiring treatment and disposal — a ratio that continues to rise as top-tier wells give way to lower-productivity Tier 3 and 4 assets. While most DLE peers face prohibitive capital requirements to build new infrastructure such as pipelines and wells, LibertyStream benefits from the billions in sunk investment already made by established midstream operators. These pipeline networks designed to gather, treat, and dispose of oilfield water now serve as a ready-made platform for LIB to deploy its basin-specific DLE technology.
By partnering with existing midstreamers, LibertyStream can integrate and automate its extraction systems rapidly, scaling at a pace competitors simply cannot match. The result is a capital-light, high-velocity commercialization model that leverages existing water infrastructure rather than recreating it.
Beyond being a critical-minerals story with national strategic importance, LibertyStream also addresses the Delaware Basin’s growing water-management problem by turning waste into resource. We see this dual exposure (lithium and water recovery) driving tangible value as aridification intensifies and water-exhaustive industries such as AI data centers strain already distressed aquifers.
We expect material near-term catalysts to drive share price appreciation, such as announcements regarding their midstream partner, any strategic joint ventures, and continued non-dilutive government funding. The company targets first battery-grade lithium carbonate production by November, positioning it years ahead of peers. For context, Standard Lithium (TSX: SLI), who we view as the best alternative domestic DLE project, is currently valued over $1 billion in market capitalization and is guiding to first production in 2028. At a current market cap of roughly $80 million, we view LibertyStream as a deeply undervalued leader in North American DLE, poised for a material re-rating as other investors begin to recognize the scale of its technological and strategic advantage.
Pathfinder Resource Fund
The Resource Fund had a net return of +16.1% for the third quarter of 2025. This compares to the benchmark which had a net return of +30.0% for third quarter. Since inception (July 16, 2018), the Resource Fund has returned +17.1% annualized versus the benchmark’s return of +13.0%. The table below provides the performance summary.
Our top contributors for the quarter were Magna Mining Inc. (TSXv:NICU), Aurion Resources Ltd. (TSXv:AU), Altius Minerals Corp. (TSX:ALS) and Ivanhoe Mines Ltd. (TSX:IVN). Our main detractors were LibertyStream Infrastructure Partners Inc. (TSXv:LIB) and Fox River Resources Corp. (CNX:FOX).
Precious metals continued higher, with gold reaching all-time new highs and silver following suit. This ongoing metals rally has been fueled by central bank buying, geopolitical tensions, interest rate cuts from the US Federal Reserve, and expected rate cuts in the future. Why are interest rates so influential? Well, as the US Federal Reserve cuts rates on interest bearing assets like Treasury Bills and savings accounts to stimulate economic growth, the opportunity cost of holding these assets decreases causing gold prices to rise. Federal reserve cuts also weaken the dollar in global terms, making gold cheaper in certain foreign currencies, increasing global demand. Geopolitical tensions also fuel incentives to buy gold as a “safe haven” asset and diversification strategy. We continue to maintain a healthy exposure to precious metals, but we are cognizant of the relatively rapid changes in commodity prices which drive share prices of precious metals companies up or down exponentially. Our goal is to protect capital by slowly and strategically trimming our positions and locking in gains. As we have learned from previous cycles, such as the short lived one in 2020, commodity prices can reverse quickly and when this happens, the biggest challenge in the small cap sector is liquidity. Once commodity prices start falling, liquidity dries up and it becomes challenging to exit positions. For this reason, despite the current strong precious metals market, we are proactively taking profits to lock in gains.
While precious metals have been on a historic run, we would like to highlight the rising interest in copper as well. We have discussed the increasing demand for copper due to the energy transition shift, but we would also like to point out the additional demand for copper due to AI data centres. We have been “long” copper for many years and believe in the strong supply and demand fundamentals which are beginning to play out especially recently as supply is beginning to tighten up due to unforeseen issues. For example, Ivanhoe Mines Ltd. (TSX.IVN) recently had seismic issues underground curtailing an area of mining and reducing production. Ivanhoe Mines is estimated to produce nearly 1% of global copper supply (on an ownership basis). While this incident modestly tightened supply in the market, it wasn’t until one of the world’s largest copper mines, Grasberg, went offline (due to operational issues), that investors fully recognized how sensitive the copper supply chain is. Grasberg accounts for at least 3-4% of global copper supply. These recent supply chain issues have led to increasing copper prices and renewed interest in premier copper projects.
As we mentioned, Ivanhoe Mines Ltd. (TSX.IVN) had to curtail a portion of their production leading to a significant decline in share price due to operational issues. While many investors saw this as a negative and sold, we saw it as a buying opportunity. IVN’s Kamoa Kakula mine experienced a bursting of pillars underground. The room and pillar method of mining is a bulk underground method used in flat or gently dipping tabular deposits. Ore is mined in a grid-like pattern, leaving “rooms” (openings) and “pillars” (columns of unmined ore) to support the roof. What happened at the IVN’s Kamoa-Kukala mine is that the pillars started failing possibly due to over-mining or under engineering, reports are still to come, in the western portion of the mine. We have followed IVN for years and assessed this as a buying opportunity based on a temporary gap in production for a world-class, multi-decade asset that was just hitting its stride. IVN has repeatedly shown the ability to execute and deliver on timelines ramping up from 200 kt of copper concentrate annually to over +500 kt in the coming year as the western portion of the mine comes back online. They have also reduced their production costs significantly with the commissioning of hydroelectric plants and the construction and commissioning of a copper smelter plant. In addition to the world class Kamoa-Kakula asset, IVN discovered another significant deposit adjacent to their mine which they own 100% of that could be as good as Kamoa-Kakula. Also, in line with our PGM thesis outlined last quarter, IVN’s Platreef deposit lines up well with our countercyclical investment thesis. Platreef is a tier-one platinum-group metals, nickel, copper and gold deposit nearing production by mid next year. We believe the market is not giving the company very much value for this deposit and as PGM prices turnaround, we expect the market to recognize the value and quality of Platreef. Despite the recent operational hiccups we believe, based on previous success and upcoming catalysts, that IVN is well positioned to outperform peers.
National Instrument 31-103 requires registered firms to disclose information that a reasonable investor would expect to know, including any material conflicts with the firm or its representatives. Doug Johnson and/or Pathfinder Asset Management Limited are an insider of companies periodically mentioned in this report. Please visit www.paml.ca for full disclosures.
* All returns are time weighted and net of investment management fees. Returns from the Pathfinder Partners’ Fund are presented based on the Class C Master series except prior to its inception in July 2011 when the Class A Master series was used. Inception returns include the 10 months from inception in March 2011. Returns greater than one year are annualized. Returns from the Pathfinder Resource Fund are presented based on the Class C Master series since its inception in July 16, 2018. The S&P/TSX Venture Composite Index (C$), the S&P/TSX Venture Composite Index, the S&P/TSX Capped Materials Index and the S&P/TSX Capped Energy Index provide general information and should not be interpreted as a benchmark for your own portfolio return. Further details of the Partners’ Fund are available on request.
Changes in Leverage. We are increasing the asset ceiling to 2.0 times the market value of equity for Pathfinder International Fund and Pathfinder Conviction Fund to be consistent with Pathfinder Partners’ Fund and Pathfinder Resource Fund.
Pathfinder Asset Management Limited (PAML) and its affiliates may collectively beneficially own in excess of 10% of one or more classes of the issued and outstanding equity securities mentioned in this newsletter. This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor PAML can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your portfolio manager, who can assess all relevant particulars of any proposed investment or transaction. PAML and the author accept no liability of any kind whatsoever or any damages or losses incurred by you as a result of reliance upon or use of this publication.