Neometals Ltd

Understanding NMT’s Operations: With respect to Mt Marion Lithium Operation, Neometals Limited (ASX: NMT) had stated that the production was stable for six months ended December 2018 and it stated that 1,444k wet metric tonnes (or wmt) ore were mined, 226k wmt concentrates were produced and 185k wmt concentrates were shipped. With respect to Lithium Hydroxide Refinery project, NMT continued pursuing the integrated lithium chemical production goals. The primary driver of the refinery revolves around increasing the value of future spodumene concentrates which are purchased under the company’s Mt Marion Spodumene Concentrate Offtake Option. The company’s profit for half-year ended December 2018 stood at $1,204,430.

Snapshot of Income Statement (Source: Company Reports)

With respect to the liquidity, it can be assumed that the company is at a decent position as its current ratio came in at 12.96x in FY 2018 which is comfortably higher than the industry median of 1.57x. This reflects that the company is in a sound position to meet its short-term obligations and it also indicates that it has sufficient headroom for growth.  

What to Expect From NMT: The consolidated entity is expected to continue its focus towards disciplined evaluation and development of the two core assets, the Mt Marion Lithium Project and Barrambie Titanium project, and also towards the development of its technology business units. The company’s strategy revolves around growing the market cap from maximizing returns from existing operations, increasing margins through higher value (downstream) products and developing the growth options.

Stock Recommendation: NMT might get supported by its decent liquidity levels as is reflective in its current ratio. Also, with respect to lithium-ion battery (or LiB) recycling project, the company had made a significant progress which is expected to support future performance. NMT has broadened the initial focus from consumer electronics batteries cobalt recovery to a multi chemistry flowsheet that can accommodate various types of LiB’s. The stock has delivered decent returns as, in the span of the previous one month, the return was 15% and, in the time period of the previous 3 months, the return was 6.98%.

Considering the above factors, we give a “Hold” recommendation on the stock at the current market price of A$0.230 per share.
 

Metals X Limited

Resolution of Temporary Loss of Power: Metals X Limited (ASX: MLX) made an announcement that the temporary loss of power to underground mine at its Nifty Copper Operations has been resolved, however production would be impacted for the quarter ended March 2019.The power outage, along with other legacy issues associated with Nifty infrastructure and mine services that MLX continues to address, had an impact on the current quarter production. The power outage was because of short-circuiting of underground power cables leading from the gas turbine to underground workings.


Key Metrics (Source: Company Reports)

The company’s EBITDA stood at -$15.3 million in the half-year ended December 2018 which implies the fall of 25.2% on a YoY basis and was impacted by Renison stock adjustments of -$10.5 million and Nifty copper concentrate NRV adjustment of -$9.7 million.The company is possessing decent liquidity levels and its current ratio stood at 2.57x at the end of December 2018 which is higher than the industry median of 1.91x, thus, providing it with sufficient scope to tap further growth areas.

Guidance for March 2019 Quarter: Metals X Limited had stated that production for the quarter ended March 2019 is expected to be between 4,000 tonnes to 4,200 tonnes of copper in concentrate. The company would be focusing on increasing development rates at Nifty, especially in the priority areas, and will also work on driving operational efficiencies and cost reductions. These are considered as the drivers which are key to the future success of Nifty and the company would continue to pursue them.

Stock Recommendation: On the daily chart of MLX, Relative Strength Index or RSI has been used and default values were used for the purposes. After careful observation, it was noted that the 14-day RSI has reached the oversold region and soon a rebound is expected to occur. If this rebound occurs, the company’s stock price might witness a rise moving forward. 

Also, the company happens to be on track to deliver ‘Reset Plan’ for Nifty in April which would be including detailed strategic roadmap, key milestones and the production ramp up profile for operation. Hence, considering aforesaid facts and current trading level, we have a “Hold” recommendation on the stock at the current market price of A$0.265 per share (down 7.018% on 12 March 2019).
 

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