Vulcan Energy Resources Limited

VUL Details

Proposed New Regulation from European Commission: Vulcan Energy Resources Limited (ASX: VUL) is engaged in energy metals exploration in Europe. The market capitalisation of the company stood at ~$222.72 million as on 14th December 2020. Recently, the company noted a proposed new Regulation from the European Commission, which mainly includes mandatory requirements on carbon footprint rules as well as responsibly sourced materials within lithium-ion battery production and consumption in the EU. The company also noted that lithium-ion batteries would have to bear a carbon intensity performance class label from 1 January 2026. During the quarter ended 30^th September 2020, the company finished Direct Lithium Extraction (DLE) testwork by using commercially available adsorbents and attained initial recovery rates of over 90%. VUL executed an agreement with EU-backed EIT InnoEnergy so that it can fully-finance its PFS. During the quarter, the net cash outflow from the operating activities stood at 404k and $2.2 million from investing activities. During FY20, the company recorded a loss amounting to $3,575,375 as compared to $836,664 in FY19.

Cash Flow (Source: Company Reports)

Outlook: For the next 12 months, the company is planning to quickly advance the Vulcan Zero Carbon Lithium Project™ by completing a Pre-Feasibility Study and by initiating a Definitive Feasibility Study.

Stock Recommendation: The company ended September 2020 quarter with a decent cash position of $5.1 million. On a TTM basis, the stock of VUL is trading at a price to book value multiple of 20.5x as compared to the industry median (Metals & Mining) of 2.8x. In addition, the stock has moved up by 45.30% and 188.29% in the last one and three months, respectively. As a result, the stock is inclined towards its 52-week high level of $2.890. On a technical analysis front, the stock has a support level of ~$1.024 and a resistance level of ~$2.776. Considering the steep price movement in the past months, current trading level and higher valuation, we are of the view that most of the positive factors have been discounted at the current trading level. Hence, we give an “Expensive” rating on the stock at the current market price of $2.630, down by 8.681% on 14^th December 2020. We further suggest investors to wait for better entry levels.

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

Euro Manganese Inc

EMN Details

Completion of Tranche 1 Placement: Euro Manganese Inc (ASX: EMN) is involved in the evaluation and development of the Chvaletice Manganese Project. The market capitalisation of the company stood at ~$136.54 million as on 14^th December 2020. Recently, the company notified the market that it has attained approval for the procurement and fabrication of its Chvaletice Demonstration Plant. In another update, the company stated that it has completed the first tranche of the private placement, which was announced on 21^st October 2020. This was comprised of 716,384 common shares and 31,183,616 CHESS Depositary Interests. The net proceeds would be utlilised to further advance its Chvaletice Manganese Project in the Czech Republic. During the June 2020 quarter (Q3 FY20), EMN raised $1,005,157 through a non-brokered private placement of 8,738,312 common shares and 401,888 CDIs, at an issue price of $0.11 per share or A$0.13 per CDI. For June 2020 quarter, the company reported project evaluation costs of $407,774.  However, it witnessed an impact of COVID-19 on the progress of projects.

Key Financials (Source: Company Reports)

Outlook: With respect to its Chvaletice Manganese Project, the company is planning the commissioning and commercial production in 2024. The company also intends to finish offtake agreements in 2022 for the project.

Stock Recommendation: The cash balance of the company stood at $0.44 million as on 30^th June 2020. In the last three and six months, the stock has moved up by 400% and 486.41%, respectively. The 52-week low-high range for the stock stands at $0.058 - $0.610, respectively. On a technical analysis front, the stock has a support level of ~$0.175 and a resistance level of ~$0.527.  Hence, considering steep price movement in the stock, nil revenue and loss-making business, we advise the investors to avoid the stock at the current market price of $0.470 per share on 14^th December 2020.

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

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