Renascor Resources Limited

Renascor Resources Limited (ASX: RNU) is engaged in the development, exploration and evaluation of graphite, gold, copper, and other minerals. It is involved in providing clean energy through vertically integrated graphite mine and developing battery anode material for the lithium-ion battery market. The operations combine the Siviour Graphite Deposit in South Australia and a state-of-the-art processing facility in South Australia to manufacture purified spherical graphite.

Financial and Operational Update: On 10 January 2022, the company announced that it completed commercial-scale downstream milling trials with a spherical graphite yield of over 65%. These higher yields from the milling process indicate an expectation to produce more Purified Spherical Graphite (PSG) and improve profit margins. On 13 December 2021, the company announced that it completed the locked cycle program and confirmed the efficiency of the company’s HF-Free purification process, with results of up to 99.99% Carbon (C) (versus anode industry standard of 99.95% C).

As per the quarterly activities report for the period ended 30 September 2021, the company entered non-binding strategic cooperation and offtake MOU with POSCO. The MOU offers to purchase 20,000-30,000tpa of Purified Spherical Graphite (PSG) and equity investment by POSCO. With the MOU with POSCO, the company has executed and announced offtake MOUs covering ~60,000tpa of PSG. Its currently proposed Stage 1 PSG production capacity is ~30,000tpa. On the financial front, the cash and cash equivalents for the quarter that ended 30 September 2021 stood at $16.10 million versus $17.27 million in the previous quarter.

Technical Analysis:

Daily Price Chart

Note: The purple color line in the chart depicts RSI (14-period). The sky-blue and green color lines represent 21-Period SMA and 50-Period SMA respectively.

On the Daily chart, RNU's stock price is still on a tear and is nearing an all-time high. However, because of the bearish divergence on the RSI, the same price should be traded with caution because a significant correction could occur at greater levels. The stock's significant resistance level is AUD 0.32, followed by AUD 0.35, and the stock's major support levels are AUD 0.23 and AUD 0.20. Because the stock is trading above the 21-SMA, a trend trading signal, the support levels could be a buying opportunity to play the upward momentum. On the daily chart, the RSI (14-period) is at 77.911, indicating that the stock is in the overbought zone.

Stock Recommendation

The company’s Battery Anode Material Project was recognized Major Project Status by the Australian Government. Also, the MOU with POSCO is expected to provide better synergy to the company in the long run. However, high competition, government’s regulatory and compliance requirements and evolving battery market are key risks associated with the company.

Therefore, considering the facts above and the current trading levels, we give a “Watch” recommendation on the stock at the closing market price of A$0.27, down 5.264% as of 18^th January 2022. 

Carnaby Resources Limited

Carnaby Resources Limited (ASX: CNB) is an exploration and development company focussed on gold and copper projects in the Pilbara’s Mallina Basin and Yilgarn Margin of Western Australia and the Mt Isa Inlier of Queensland. The company holds a 442km land package in the Pilbara’s Mallina Basin. The company also holds gold and copper targets, including the Greater Duchess Copper-Gold Project creating a total region holding of 384 km.

Financial and Operational Update: On 17 January 2022, the company announced the drill results from the Greater Duchess Copper Gold Project in Mt Isa, Queensland. Strong assay results were received from a further six holes drilled at Lady Fanny and Burke & Wills Prospects. On 10 January 2022, the company announced drill results from the Nil Desperandum Prospect within the Greater Duchess Copper Gold Project in Mt Isa, Queensland. Assay results were received for NLDD042, confirming a broad high-grade copper gold discovery at Nil Desperandum.

On 28 October 2021, the company released September 2021 quarterly report. The cash stood at $5.6 million as of 30 September 2021, including $0.3 million in restricted cash. The betterment in the terms of the Share Sale Agreement for the divestment of the Lainejaur Project in Sweden was announced in the quarter. The company is anticipated to receive proceeds from the $1.5 million total consideration in the coming months.

Technical Analysis:

Monthly Price Chart

Note: The purple color line in the chart depicts RSI (14-period). The sky-blue and green color lines represent 50-Period SMA and 21-Period SMA respectively.

On the monthly chart, CNB prices witnessed significant rally last month after the price broke its crucial resistance level of AUD 1.04. Prices recently again took support of the resistance turned support level of AUD 1.04 and again made a new all-time high levels. However, RSI (14-period) is hovering at extreme overbought zone at ~87 on a monthly chart that indicates profit booking might occur in the coming period. Volumes are also drifting down compared to last month further indicates that bulls are losing strength. Immediate support levels are AUD 1.48 and AUD 1.04 while immediate resistance levels are AUD 1.84 and AUD 2.20.

Stock Recommendation

The drilling updates released by the company are promising and indicate focus results in the future. Also, the company has a decent cash position for operations. However, any adverse change in regulatory and compliance requirements by the government could disrupt the company's operational efficiency.

Therefore, considering the facts above and the current trading levels, we give a “Watch” recommendation on the stock at the closing market price of A$1.75, up 9.034% as of 18^th January 2022.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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