Poseidon Nickel Limited

POS Details

Poseidon Nickel Limited (ASX: POS) is an explorer of nickel sulphide with Mt Windarra, Black Swan, and Lake Johnston nickel projects in Western Australia.

Q3FY22 (ended 31 March 2022) Operational Updates:

• POS progressed considerably on the Bankable Feasibility Study (BFS) and engineering studies at the Black Swan project in Q3FY22.
• POS completed the diamond drilling underneath the Black Swan pit in Q3FY22 and currently working on the new resource estimation to publish the results in the June 2022 quarter.
• Lake Johnston Exploration Update: In Q3FY22, POS received approval from the Department of Mines, Industry Regulation and Safety (DMIRS) for an exploration program targeting the Western Ultramafic unit.

Comparative Cashflow Summary; (Analysis by Kalkine Group)

Key Risks:  The company faces a tight labour market, nickel price volatility, exploration risk, resource expansion, and regulatory delays.

Outlook:

• POS expects to deliver the BFS and take FID (Final Investment Decision) in September 2022 at the Black Swan project. It continues to prioritise the restart of the Black Swan project and advance with the feasibility study works in the June 2022 quarter with ~$5.3 million project costs.
• POS estimates to produce ~15,000 tonnes per annum of nickel in concentrate from the Black Swan and Lake Johnston projects once the production starts.
• POS will commence the exploration activity on the Lake Johnston project comprising drilling up to ~250 holes and ~15,000 metres in the next quarter.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of POS gave a positive return of ~20.23% in the past month. The stock is currently trading lower than the 52-weeks’ average price level band of $0.056 - $0.160. The stock has been valued using the P/E-multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at some discount than its peers’ median P/E multiple, considering the exploration & commercialisation risk, and continuing COVID-19 disruptions. For this purpose of valuation, a few peers like Nickel Mines Ltd (ASX: NIC), South32 Ltd (ASX: S32), Panoramic Resources Ltd (ASX: PAN), and others have been considered. Considering the current trading levels, recently reported increase in the Indicated Mineral Resources from both Golden Swan and Silver Swan deposits, ongoing resource definition drilling at the Black Swan project, low debt levels, an indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $0.067, down by ~1.470%, as of 31 May 2022.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

POS Daily Technical Chart, Data Source: REFINITIV  

Hot Chili Limited

HCH Details

Hot Chili Limited (ASX: HCH) is an explorer of copper and gold and operates the Costa Fuego Copper Project in Chile.

Latest Business Updates & Q3FY22 (ended 31 March 2022) Highlights:

• On 17 May 2022, Director Allan Trench acquired ~337 ordinary shares at ~A$1.25 per share upon the exercise of ~337 unlisted options.
• HCH recently reported significant drilling results from the exploration at the Cortadera deposit, particularly from the holes CORMET005 and CORMET002 and in addition to the current high-grade resource at Cuerpo 2.
• HCH has prepared the Santiago Z target for the first-ever drilling. It expects to complete the platform and access clearing in the coming weeks and after the finalisation of drilling at the Valentina and San Antonio deposits.
• The quarter saw HCH shares trading on the US-Based OTCQX Market under the symbol OTCQX: HHLKF with effect from 7 April 2022.
• In Q3FY22, HCH implemented an offtake contract with Glencore covering ~60% of copper concentrate from the Costa Fuego project for eight years commencing from commercial production.

Comparative Key Metrics; (Analysis by Kalkine Group)

Key Risks:  The company faces the risk of a tight labour market, copper price changes, resource discovery and expansion, and regulatory delays.

Outlook: HCH plans to undertake exploration at the Cortadera, Productora, and the San Antonio and Valentina copper deposits for resource upgradation and will report updates from the development study workstreams and explorations shortly.

Stock Recommendation: The stock of HCH has been corrected by ~7.60% in the past three months. The stock is currently trading lower than the 52-weeks’ average price level band of $1.130 - $2.600. On a TTM basis, the stock of HCH is trading a price-to-book value multiple of ~0.7x versus the industry (Basic Materials) median of ~2.1x, and thus seems undervalued at current trading levels. Considering the current trading levels, low debt levels, recent resource upgrade at the Cortadera deposit, exploration upside potential at the Cortadera, Productora, and San Antonio deposits, secured long-term offtake agreement with Glencore, valuation on a TTM basis, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $1.215, down by ~0.409%, as of 31 May 2022.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

HCH Daily Technical Chart, Data Source: REFINITIV 

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

Note 2: Investment decision 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 Valuation has been achieved and subject to the factors discussed above.

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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