Paladin Energy Ltd

PDN Details

Langer Heinrich Mine Restart Plan:  Paladin Energy Ltd (ASX: PDN) is primarily involved in the development and operation of uranium mines in Africa. The market capitalisation of the company stood at ~$294.04 million as on 7^th August 2020. During the quarter ended 30^th June 2020, the company released results of the Langer Heinrich Mine Restart Plan. The company added that Langer Heinrich is well-placed on the back of low restart capital intensity and competitive C1 Cost of Production. The Restart Plan has affirmed a 17-year mine life for Langer Heinrich with peak production of 5.9Mlb U₃O₈ per annum for 7 years. During the quarter, the company finished the work required to meet minimum tenement commitments. PDN continues to monitor the uranium price and market, with an objective to secure uranium term-price contracts with sufficient terms and value to support the restart of the Langer Heinrich operation.

Key Operational Metrics of Langer Heinrich (Source: Company Reports)

Expenditure Guidance: For FY21, the company expects total expenditure amounting to US$9.5 million compared to the US$16.8 million of FY20. This indicates the sale of the Kayelekera Mine, the optimisation of Care and maintenance (C&M) activities at the Langer Heinrich Mine, decreased restart planning costs and lower corporate costs.

Key Risks: The company is exposed to a variety of financial risks such as market, liquidity and credit risk. To manage these financial risks, the company ensures enough net cash flows to address all its financial commitments. 

Stock Recommendation: During the quarter, the business priorities of the company were impacted by the COVID-19 crisis as well as travel restrictions. As at 30^th June 2020, the cash and cash equivalents of the company stood at US$34.2 million. Debt to equity of the company stood at 1.08x in 1H FY20 as compared to the industry median of 0.48x. The stock of PDN has moved up by 26.09% and 62.92% in the past three and six months, respectively. As a result, the stock of PDN is inclined towards its 52-high of $0.150. Thus, considering the current trading levels, more leveraged balance sheet, price movement, etc., we advise investors to book profit on the stock and give a “Sell” recommendation on the stock at the current market price of $0.150 per share, up by 3.448% on 7^th August 2020.

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

Vital Metals Limited

VML Details

A Look at June 2020 Quarter: Vital Metals Limited (ASX: VML) is engaged in mineral exploration in Niger and in Burkina Faso, West Africa. The market capitalisation of the company stood at $25.71 million as on 7^th August 2020.  Recently, the company has appointed Mr. James Henderson for the role of Non-Executive Director. During the June 2020 quarter, the company obtained approval to start mining operations at Nechalacho rare earth project in Canada. The company also received approvals to operate open pit mine at North T and crushing and ore sorting facility in order to produce high-grade rare earth concentrate. Also, the Cheetah Resources Ltd (100% subsidiary of VML) has been selected for Accelerated Growth Services Program of Government of Canada. At the end of June 2020 quarter, the net cash used in the operating activities stood at $0.465 million. During 1H FY20, the company reported loss amounting to $3,263,828 as compared to the profit of $5,673,690 in 1H FY19.

Cash Flows (Source: Company Reports)

Outlook: The company is running on the track to become the world’s next REO (Rare Earth Oxides) producer. The company is focusing on decreasing capital expenditure as well as time to market for increasing shareholder returns.

Key Risks: The company’s business is exposed to numerous financial risks such as market risk (including currency risk and interest rate risk), credit risk and liquidity risk. Market risk arises from the fluctuation in market prices. This may affect the company’s income or the value of its holdings of financial instruments.

Stock Recommendation: VML stated that Covid-19 had created a disruption to its business activities. At the end of June 2020 quarter, the company experienced a marginal impact of Covid-19 on its staff and contractors. The stock of VML has moved up by 20% in the past six months, and as a result, it is trading close to its 52-week high of $0.015. Hence, considering the losses during 1HFY20, disruptions created by the Covid-19 and current trading levels, we give a “sell” recommendation on the stock at the current market price of $0.012 per share on 7^th August 2020.

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

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