Stocks’ Details

Euro Manganese Inc 

Decision to List on OTCQX: Euro Manganese Inc (ASX: EMN) is a battery materials firm, engaged in the development of a new high purity manganese production facility, based on the recycling of manganese deposit located in the Czech Republic. EMN holds 100% interest in developing Chvaletice Manganese Project (CMP). As of 3rd March 2021, the market capitalisation of the company stood at ~$215.68 million. On 1 March 2021, EMN announced its decision to pursue a listing on the OTCQX trading system (US-based) given increasing US investor interest in the company and its manganese project. Recently, EMN and Mangan Chvaletice, its Czech Republic wholly-owned subsidiary have entered a project support agreement and a value added services agreement with EIT InnoEnergy. EIT InnoEnergy will sponsor €250,000 on the project initially to support the detailed feasibility study (DFS) and demonstration plant estimated to be finished till the close of 2021. EIT InnoEnergy spearheads the industrial stream of the European Battery Alliance (EBA) and CMP will support Europe’s growing EV industry and deliver environmental advantages. On 4 February 2021, EMN announced exercise of warrants to acquire 2.85 million shares of EMN at a price of CAD$0.30 per share to raise CAD$857k. Following the exercise of warrants, EMN issued 331k shares and 2.52 million CHESS Depositary Interests (“CDIs”, where each CDI represents a share).

December 2020 Quarter (Q1FY21) Results: During Q1FY21, EMN declared completion of a six-month screening of the initial EIA on the project undertaken by the Czech Environment Ministry. EMN has been notified regarding the same and can now move towards preparation of the final EIA. EMN restarted the confirmatory test work, engineering studies for DFS and booked the order for the demonstration plant during Q1FY21. During the quarter, EMN undertook a non-brokered private placement of 444k common shares at CAD$0.45 per share to raise CAD$200k for working capital needs. The company also raised $11.3 million (gross) via a two-tranche brokered private placement. It placed 1.9 million ordinary shares and 58.1 million CDIs at CAD$0.19 per ordinary share to progress on CMP and accomplished near-term milestones. During Q1FY21, EMN agreed to buy rights to three important land parcels, completing its land assembly for the proposed commercial plant. EMN incurred CAD$484k of project evaluation expenses during Q1FY21. EMN held a cash balance of CAD$11.4 million as of 31 December 2020.

Financial Summary, October-December 2020 (Source: Company Reports)

Key Risks: The company faces the risk of adequate and timely funding at various stages of the project. It needs additional funding for the completion & commissioning of demonstration plant and conduct DFS. Due to COVID-19, EMN witnessed delays in financing and progressing on the project. EMN anticipates further disruptions arising from an extended period of the pandemic and may affect its service providers and suppliers thereby causing more delay in its planned activities.

Outlook: The company will incorporate the public and regulatory response from the screening process and undertake Final EIA, aimed at completion by the end of calendar 2021. Accordingly, it expects final permitting for the project in 2022.

Stock Recommendation: The stock of EMN gave a positive return of 850% in the past six months and a positive return of 533.33% in the past nine months. The stock is currently trading slightly above the 52-weeks’ price level of $0.058-$0.965. The stock of EMN has a support level of ~$0.50 and a resistance level of ~$0.59. On a TTM basis, we have valued the stock using the price to book value multiple of ~2.9x, higher than the industry (Metals & Mining) median of ~2.2x, thus seems overvalued. Considering the current trading levels, absence of revenue from core projects, loss-making business during FY16-FY20, and negative ROE, we give an ‘Avoid’ rating on the stock at the current market price of $0.540, down by 5.264% on 3^rd March 2021. 

Ionic Rare Earths Limited

Rise in MRE at Makuutu Rare Earths Project: Ionic Rare Earths Limited (ASX: IXR) conducts mining and resource operations in Australia. In Uganda, it operates via affiliate Rwenzori Rare Metals Limited (RRM) and in Nicaragua through a wholly-owned subsidiary - Minera San Cristobal. As of 3^rd March 2021, the market capitalisation of the company stood at ~$175.36 million. The company announced significant rise of 210% in mineral resource estimate (MRE) at its Makuutu Rare Earths Project (MREP-51% stake) based on several key drilling inputs. With the expanded resource, IXR believes it will be able to finalise the scoping study. Also, IXR may increase its stake in the project to 60%, subject to meeting certain commitments. On 24 February 2021, IXR issued 53.2 million fully paid common shares pursuant to the exercise of 53.2 million options at $0.0075 per option. It issued another 300 million fully paid ordinary shares at $0.04 per share.

Placement of $12 Million for the Project BFS:  Recently, IXR announced securing firm commitments for raising $12 million capital via a share placement of 300 million shares at $0.04 per share. The issue was oversubscribed and will help in de-risking the development timeline BFS project.

December 2020 Quarter Results: During Q2FY21, IXR rose its stake in MREP to 51% through an earn-in contract with RRM based on completion of a BFS. The company received a renewal of its Makuutu Retention Licence No. 1693 during the quarter. It was granted exploration licences on EL00147 and EL00148, expanding the scope of exploration target by 50%. During Q2FY21, IXR undertook Phase 2 drilling in areas A, B, C, F, G, H, I and J at Makuutu and results indicate the next resource upgrade to be substantial. During Q2FY21, IXR witnessed a significant rise in the potential Makuutu basket price due to restrictions imposed on exports of nuclear and military products under a new Chinese Export Control Law in October. IXR held a cash balance of $2.25 million as of 31 December 2020.

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

Key Risks: The company is exposed to the risk of regulations regarding the trade and mining of rare earth minerals. It is still in exploration stages and estimating MRE at the project. It faces the risk of interpretation of drilling results, timely completion of BFS for raising stake in RRM and timely regulatory approvals to accomplish milestones set.

Outlook: IXR plans to advance key activities at Makuutu for the completion of the Bankable Feasibility Study (BFS) by October 2022 to earn and raise its interest to 60% in RRM.

Stock Recommendation: The stock of IXR gave a positive return of 314.28% in the past three months and a positive return of 427.27% in the past six months. The stock is currently trading above the 52-weeks’ average price level of $0.004-$0.064. The stock of IXR has a support level of ~$0.0611 and a resistance level of ~$0.0551. IXR recently hit its 3 years high levels and is currently trading in an extreme overbought region at ~90 on a weekly chart as far as RSI (14) is concerned. Hence, considering the current trading levels, significant returns in the past 3 months and 6 months, low debt levels, we believe that most of the positive factors are discounted at 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 $0.058, up by 5.454% on 3^rd March 2021, owing to the update regarding the rise in the Mineral Resource Estimate.

RareX Limited

Projects Update: RareX Limited (ASX: REE) is a developer and explorer of copper-gold projects in the New South Wales (NSW) in Lachlan Fold Belt. It holds 35% interest in the Trundle copper-gold project via its 7.8% equity in Kincora Copper Limited (KCL), TSXV. It owns Cummins Range Rare Earths (CRRE) project (100%) in Western Australia (WA). As of 3^rd March 2021, the market capitalisation of the company stood at ~$51.08 million. On 1 March 2021, Mr. Simon Lee became a substantial holder in REE by acquiring 25 million ordinary shares at $0.11 per share (5.76% voting rights) for a consideration of $2.75 million. The company is planning to re-commence drilling at Cummins Range in March 2021. Presently, it has been working on the Mineral Resource upgrade and metallurgical testing at CRRE project. For the Trundle project, REE announced that the current drill program results at the Trundle Park prospect exhibit shallow copper-gold mineralisation. The company notified that the prices of rare earths had risen significantly in recent months. Prices of Praseodymium and Neodymium were reported to be up to US$60.9/kg and US$86.5/kg, respectively.

On 4 February 2021, REE announced that it has signed a non-binding Memorandum of Understanding (“MoU”) with the Shenghe Resources Holdings Co (SRHC). As per the MOU, the two companies will form a jointly owned Rare Earths Trading Company (“RET Co”) to source rare earths concentrates (excluding from within China) which will be processed at SRHC’s present and new refining assets available worldwide. REE will hold majority stake (51%) in the newly formed company.

Q2FY21 Results Highlights: At Weld North Rare Earths Project, REE finished drilling for 23 air-core holes and has received assay results exhibiting a circular magnetic anomaly (a late-stage granite). On Trundle Park prospect, KCL reported results from drilling of the TRDD008 hole with 2 significant zones of mineralised skarn. The drill is continuing deeper and testing the potential for a more extensive causative porphyry intrusion system. During Q2FY21, REE informed that it has entered into a contract with Talaxis Group Holdings (TGH) for an option to acquire its 100% stake in Canada Rare Earth Company (CREC). Under the contract terms, REE will pay $50k to TGH for an option to acquire 24.77 million shares at C$0.04 per share in CREC before 18 February 2021 for a sum of C$991k. REE held a cash balance of $4.33 million as of 31 December 2020 and held 14.95 million shares in KCL at the close of Q2FY21.

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

Key Risks: The company faces the risk of drilling due to environmental terrain, conditions, project delays and lack of commercialisation owing to lack of mineralisation and exploration. It may experience volatility in costs, prices, and demand for minerals due to market conditions and engagement with parties to market the product.

Outlook: REE expects to publish mineral resource upgrade results in this quarter and will furnish results from the initial phase of metallurgy after that. REE expects ground-based exploration to follow on Weld North and Cummins Range projects later in FY21.

Stock Recommendation: The stock of REE gave a positive return of 138.46% in the past six months and a positive return of 158.33% in the past nine months. The stock is currently trading above the 52-weeks’ average price level of $0.013-$0.205. The stock of REE has a support level of ~$0.153 and a resistance level of ~$0.173. On a TTM basis, the stock of REE is trading at a price to book value multiple of ~8.4x, higher than the industry median of ~3.0x, thus seems overvalued. Considering the current trading levels, significant returns in the past 3 months and 6 months, valuation on TTM basis, we believe that most of the positives have been discounted at the current juncture. Based on the news of landmark MOU signed last month and resource upgrade results expected on the project this quarter, the stock reflects limited upside. Hence, we suggest investors wait for better entry levels, and give an ‘Expensive’ rating on the stock at the current market price of $0.160, up by 23.076% on 3^rd March 2021, owing to the release of an investor presentation by the company and news of a substantial holder.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer  

The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as personalised advice.