Aston Minerals Limited

ASO Details

Gold Intersection at the First Drill Campaign at Edleston Project: Aston Minerals Limited (ASX: ASO) is an explorer, developer, and acquirer of resource-based projects, mainly cobalt. It operates in Australia, Europe, and Indonesia. As of 11 March 2021, the market capitalisation of the company stood at ~$50.55 million. On 10 March 2021, ASO announced an intersection with coarse gold veinlets from the diamond drilling at the third hole (DDED21-003) at Edleston gold project (EGP). The current drilling is aimed at an area of 200 metres along strike of the main body of gold mineralisation defined at Edleston. Till now, the company has completed the drilling of three diamond drill holes for 1,320m. ASO intersected quartz veining zone with pyrite-pyrrhotite in all three holes and it seemingly correlated well with the projected target intervals.

A Look at the December 2020 Result Highlights: During the December 2020 quarter, ASO finished an exploration program at Edleston, Sirola Zone, and Budd target at the EGP. The sampling results at the Budd Target and Sirola Zone demonstrated significant mineralisation of gold, zinc, copper, and silver. ASO has secured additional ground to further consolidate the gold project. The company is awaiting drilling approvals from the provincial Government to start its first drill program at the project. During Q2FY21, ASO has evaluated several additional resource avenues within the gold sector in Canada. At Dobsina Cobalt Project (DCP) in Slovak, as the present cobalt market conditions are subdued, only essential work has been done and expenditure will be incurred to keep the tenure in good condition in the future. All non-essential work has been postponed for an indefinite period at the project.

Jouhineva cobalt-copper gold project (JCCGP) in Finland was forecasted to be started in early FY21 subject to a minimum expenditure drilling campaign, meeting the Finnish Government law and WHO guidance. ASO will update on the project upon finalisation of the work program.

ASO is evaluating its decision to retain Basinge, Kila, Frustuana, Havsmon projects in Sweden and begin suitable work programs to develop each project post evaluation. During the quarter, ASO signed an exclusive option contract to sell Ekedal and Ruda, its Swedish licences. It held $7.84 million of cash and cash equivalents as of 31 December 2020.

Cash Flows from Operating Activities, Q2FY21 (Source: Company Reports)

Key Risks: The company faces the threat of achieving desired drilling outcomes, test results and timely approval for the drilling program from the authorities. It faces the risk of closures, restrictions on movement due to the pandemic crisis prevalent.  

Outlook: At Edleston project, the company has completed drilling of three holes so far and will provide further updates from the drilling results of the remaining holes. At JCCGP, ASO will update the market regarding the program and its timing upon deciding the final work program.

Stock Recommendation: The stock of ASO gave a positive return of 100% in the past one month and a positive return of 481.81% in the past one year. The stock is currently trading towards its 52-weeks’ high level of $0.067. The stock of ASO has a support level of ~$0.048 and a resistance level of ~$0.081. On a TTM basis, the stock is trading at a price to book value multiple of ~5.4x higher than the industry (Metals & Mining) median of ~2.9x, thus seems overvalued. Considering the current trading levels, significant returns in the past one month and one-year, decent cash position, no debt as of 30 June 2020 and valuation on a TTM basis, we believe that most of the positive factors have been discounted at the current juncture. Hence, we suggest investors to wait for better entry levels, and give an ‘Expensive’ rating on the stock at the current market price of $0.064, up by 10.344% on 11 March 2021, owing to news of gold intersection at maiden drilling of EGP.

ASO Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Essential Metals Limited

ESS Details

Gold Mineralisation Confirmed at Gards Prospect: Essential Metals Limited (ASX: ESS) is an exploration and mining company. It operates a portfolio of caesium/ lithium, nickel and gold projects in Western Australia and a lithium asset in Canada. As of 11 March 2021, the market capitalisation of the company stood at ~$20.08 million. The company has received the assay results from the 23-hole reverse circulation (RC) drill programme undertaken at Golden Shovel, Gards, Moonbaker and Dwyer prospects at its Juglah Dome gold project (JDG). It intersected strong gold mineralisation at the Gards prospect at three holes out of the eleven holes drilled. ESS will follow up drilling to the south, where mineralisation seems to improve. At the Moonbaker prospect, it discovered gold at two holes out of the four drilled holes.

A $4 million Joint Venture for Blair-Golden Ridge Project: On 9 February 2021, ESS announced a nickel farmin Joint Venture (a nickel Farmin) with a subsidiary of Crest Investment Group Limited (CIGL) to explore nickel sulphides at its Blair-Golden Ridge Project. The JV allows CIGL an opportunity to earn a 75% stake in the project by spending $4 million in 4 years. ESS will hold 25% interest, the decision to mine and retain the mineral rights for the metals. The JV is subject to completion of due diligence by CIGL till 15 March 2021 and the exercise of an option after that to proceed.

Several Lithium Targets Identified at Pioneer Dome Project (PDP): The project currently hosts the Dome North mineral resource of 11.2Mt @ 1.21% of lithium oxide (Li2O). On 1 February 2021, ESS announced several new lithium targets at PDP from its list of high-priority targets (32) and medium-priority targets (16).

Q2FY21 Result Highlights: At the JDG project, ESS completed a drilling programme at the Golden Shovel, Gards, Dwyer, and Moonbaker prospects on time. It expects to receive the assay results over the next 4 weeks. At the Dome North Lithium project (DNL), ESS received robust results from the metallurgical testing on the high-grade Cade Deposit. The test demonstrated a recovery rate of 74% for total lithium oxide (Li2O) and the Cade Deposit responsiveness to the conventional process routes.

ESS received $106k of receipts from the customers for Q2FY21. During the quarter, ESS raised $2.14 million from a share purchase plan (SPP) and a share placement of $2.05 million at $0.085. Share placement was done at a 1-for-2 free option. As of 31 December 2020, ESS was debt-free, held $0.3 million in listed shares, and a cash balance of $6.65 million.

Cash Flows from Operating Activities, Q2FY21 (Source: Company Reports)

Key Risks: The company is exposed to the threat of discovery of nickel, gold, cobalt, and lithium on its projects. It also faces the risk of seeking timely approval from the authorities for the exploration licence, conducting a drilling programme, and commercialising the projects. 

Outlook: ESS will conduct a drill programme in the early June Quarter to test new prospects and increase the Dome North resource. At PDP, ESS has planned a field reconnaissance programme to map the high and medium priority targets.

Stock Recommendation: The stock of ESS gave a positive return of 19.04% in the past three months and a positive return of 5.26% in the past six months. The stock is currently trading lower than the average 52-weeks price level band of $0.07 and $0.180. The stock of ESS has a support level of ~$0.072 and a resistance level of ~$0.147. On a TTM basis, the stock is trading at a price to book value multiple of ~1.1x lower than the industry (Metals & Mining) median of ~2.9x, thus seems undervalued. Considering the current trading levels, debt-free balance sheet, high-profit margins and ROE, and valuation on a TTM basis, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.100 on 11 March 2021.

ESS Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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