Vulcan Energy Resources Ltd (ASX: VUL)

Vulcan Energy Resources operates as an exploration company developing a combined geothermal and lithium extraction project in the Upper Rhine Valley of Germany. The company uses renewable geothermal energy to power the lithium extraction process and create a renewable energy by-product.  The current market capitalization is AUD1.72 billion, and the current price is AUD15.90 per share.

Financial & Operational Updates – VUL has signed a term sheet with LG Energy Solutions to supply 10,000 metric tons of lithium hydroxide. It had commenced Direct Lithium Extraction (DLE) Pilot Plant to demonstrate lithium extraction from live geothermal brine. This will be followed by a Definitive Feasibility Study.

In a study conducted on May 2021, VUL achieved a target recovery of over 90% for lithium chloride from Upper Rhine Valley brine. VUL to ramp up the pilot plant and production of lithium chloride solutions to be converted to lithium hydrogen. It was granted a new exploration license in Upper Rhine Valley. During the quarter ending June 2021, VUL successfully spun off its Scandinavian battery metals projects into a new dedicated vehicle, “Kuniko Limited” and initiated an IPO. VUL to apply for dual listing on Frankfurt Stock Exchange.

VUL aims to decarbonize the production of batteries for electric vehicles by developing the Zero Carbon Lithium project. It recently engaged BNP Paribas to structure and execute the financing of the project. With nil revenues so far, the company had a solid cash balance of $114.7 million as of June 30, 2021.

Technical Analysis: VUL's prices are trading above a symmetrical triangle breakout level on the daily chart, indicating an upside direction for the stock. RSI (14-period) is trading around an overbought zone at ~67.937 levels and supporting a positive stance. MACD is trading above centreline with a positive crossover and ADX is also indicating a positive direction. Now the resistance level for the stock appears at $17.50 followed by $18.90, while support is at $14.55 level.

Investors may consider exiting from the stock if the Resistance levels mentioned as per the technical analysis have been achieved, subject to risk-taking appetite and other factors discussed above.

Considering the strong cash balance supporting growth prospects, new exploration license in Upper Rhine Valley, supportive technical levels, strong traction in Zero Carbon Lithium project, and dual listing plans, we recommend ‘Speculative Buy’ rating on the stock at the closing price of $15.900 as of 13^th September 2021. However, the risk levels are high in view of the technical support levels, and till the time any visible results from the new exploration license granted.

Daily Technical Chart – VUL

Source: REFINITIV

Strandline Resources Limited (ASX: STA)

Strandline Resources Limited is a producer of heavy mineral sands with a portfolio of 100%-owned development assets located in Western Australia.

Financial & Operational Highlights - In a recent construction update on its 100%-owned Coburn mineral sands project, the company informed that all major construction contracts for the project have now been awarded and the construction is progressing in accordance with the development plan. The company is now preparing for the above-ground infrastructure. The first production of heavy mineral concentrate (HMC) from the project is expected its December quarter, 2022. Over the June 2021 quarter, STA made a Final Investment Decision (FID) to proceed with the full development of its Coburn mineral sands project. Further, the company also progressed its portfolio of high-growth mineral sands assets in Tanzania. During the quarter, the company secured funding of A$338 million. At the end of the June quarter, the company had a cash balance of A$116.4 million.

Technical Analysis: On the weekly chart, STA prices have been under pressure from the high of AUD 0.293 and made a recent low of AUD 0.165 level on 10 September 2021. Moreover, the prices are trading below the trend-following indicator 50-period SMA, which may act as a crucial resistance level for the prices. The leading indicator RSI (14-Period) is trading at ~42.684 levels and showing the negative sign which might indicate the possibility of a downside correction from the current levels. An important support level for the stock, is placed at AUD 0.165 while the key resistance level is placed at AUD 0.204.

Investors can consider exiting from the stock if the Resistance levels mentioned as per the technical analysis have been achieved as per their risk-appetite and are subject to the factors discussed above.

Considering the decent progress on the Coburn Mineral Sands Project and its modest long-term outlook, supportive mineral sands market fundamentals, rising cash balance, current trading level, associated risks, and technical support and resistance level, we suggest a “Speculative Buy” on the stock at a closing price of $0.180, as on 13^th September 2021, 10AM (GMT +10) Sydney, Eastern Australia.  However, the investors with high-risk appetite should evaluate the stock taking into consideration the support and resistance zones for any investment actions.

Daily Technical Chart – STA

Source: REFINITIV

Novonix Limited (ASX: NVX)

Novonix caters to the energy storage market with synthetic graphite used to processes specialty coke to make anode material for industrial batteries. NVX has a market capitalization of ~$2.38 billion and is trading at $5.840 a share.

Financial & Operational Highlights – In the recent financial updates, NVX posted a ~23% rise in revenues to $5.23 million in FY21. It had closed a new anode materials facility in Chattanooga, TN. The company is underway to schedule anode shipments to Samsung SDI for the qualification program. It had already shipped to Sanyo for qualification using Generation 2.

The company is progressing to install Generation 3 furnace systems in Tennessee before the end of this calendar year. NVX closed a ~35,000 sq ft facility in the Halifax area for Battery Technology Solutions. It had received approval for up to C$1.28 million through a payroll rebate from Nova Scotia Business Inc over the next five years to support hiring activities. The company is investing $8.5 million in commercialization of its DPMG technology. On August 10, 2021, Phillips 66 has picked up 16% stake in NVX to support the development of the US battery supply chain. The total consideration of US$150 million to be received from the deal. In February 2021, NVX raised $115 million through private placement. As per the annual report, NVX posted a loss of $18.07 million in FY21 as compared to loss of $20.03 million in PcP. Net tangible assets per share inclined to $0.41 as against $0.14 posted last year.

Technical Analysis- NVX's prices witnessed a sharp upside movement and gained ~130% from the Aug 2021 low. Now the RSI is trading in an extremely overbought zone on the daily, weekly and monthly time frames charts. On the weekly chart, RSI (14-period) is forming a negative divergence with the price action. MACD and ADX both indicating an overbought status for the stock. On the lower side, $5.20 acts as an immediate support level and a breakdown of the same may initiate a downside correction in the stock.

The company is investing heavily into commercialization of its DPMG technology and witnessed decent flow of cash from investments made by Phillips 66, albeit risks associated include insufficient revenues, continued losses, and stock trading at an overbought zone. Hence, at this stage it is prudent to ‘Watch’ further stock price direction at the market price of $5.830 as of 13^th September 2021, 2.35PM (GMT +10) Sydney, Eastern Australia. However, the investors with high-risk appetite may evaluate the stock near the support zone for any investment actions.

Daily Technical Chart – NVX

Source: REFINITIV

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

Note 2: Investment decisions should be made depending on the investors’ appetite for 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 the uptrend may take a pause due to profit booking or selling interest. 

The Green colour line reflects the 21-period moving average. SMA helps to identify existing price trend. If the prices are trading above the 21-period, then it shows prices are currently trading in a bullish trend, (Vice – Versa).

The Purple colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

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