American Rare Earths Limited (ASX: ARR)

ARR is engaged in the exploration and development of mineral resources in Australia and the United States. The company explores thorium and uranium base and precious metals; industrial minerals; copper; and cobalt. The company was incorporated in 1986 and is based in Sydney, Australia. The market capitalization stood at $48.20 million at $0.135 per share.

Financial & Operational Update – On 3^rd August 2021, the company announced updates on the drilling at La Paz property, revealing positive results as an increase of 117% to 35.2 million tonnes of rare-earth metals, specifically 66.6 million kgs TREE and approximately 80.0 million kgs of TREO. Further, the New Resource estimates count 4.4 million kgs of Scandium Oxide (Sc2O3). On 2t^th July 2021, the company released its June 2021 quarterly update, stating the successful acquisition of Scandium Minerals Rights at the Split Rocks project in Western Australia. On the financial front, the cash receipts from the customers grew to $12k on 30^th June 2021, from $9k on 31^st March 2021. The cash balance declined to $3.70 million for the quarter ending 30^th June 21 as compared to the $4.62 million on 31^st March 2021.

Technical Analysis- The stock exhibits the volatile nature with various spikes and printed the lift time high of $0.25 and cooled off from there, forming a range-bound movement since then. The relative strength index is at 75.478, which is heading towards the upper end of the zone, indicating some more strength remaining in the stock to drive it upwards. The 21 days simple moving average is hovering below the stock price at $0.135, indicating further uptrend potential with the stock from these levels. A lack of trend confirmation from current levels. For the prices to prohibit from diving into the bear territory, the support of $0.095 should be held firmly. Similarly, for the prices to regain the uptrend, a resistance of $0.18 needs to be taken off with strong volumes.

With insignificant cash receipts from its customers, decreasing cash balances, and rising stock prices gives the discomfort for the investors. Hence we give the stock the rating of ‘Avoid’ at the closing price of $0.135, down by ~3.57%, as of 11^th August 2021.

Daily Technical Chart – ARR

Source: REFINITIV

Novonix Limited (ASX: NVX)

NVX is an Australia-based company engaged in developing and supplying materials, equipment and services for the global lithium-ion battery industry. The company operates through three segments: Graphite Exploration and Mining, Battery Technology, and Battery Materials. The company was incorporated in 2012 and is headquartered in Brisbane, Australia. The market capitalization stood at $1.41 Billion at $3.92 per share.

Financial & Operational Updates – On 10^th August 2021, the company announced that Phillips 66 (NYSE: PSX) agreed to acquire a 16% stake in Novonix Ltd. (ASX: NVX, OTC: NVNXF) for a total consideration of US $150 million. On the financial front, the company improved its cash receipts from its customers to $2.03 million for the quarter ending 30^th June 2021 from $1.28 million for the period ending 31^st March 2021. Further, the operational efficiency also improved in terms of reducing the operating cash outflows to $0.99 million, as compared to the outflows of $2.23 million in the comparable period. The cash balance was increased for the period ending on 30^th June 2021 to $136.66 million from $131.38 million in Q3FY21.

Technical Analysis- The stock inched gradually and showed a lifetime high of $4.23 and colled off a bit. The prices are hovering near the high levels again and poised to take a direction in the coming time. The relative strength index is at 83.067, which is heading towards the upper end of the zone, indicating some more strength remaining in the stock to drive it upwards. The 21 days simple moving average is hovering below the stock price at $2.794, indicating further uptrend potential with the stock from these levels. Since the prices have moved up, hence the support levels have also elevated at higher levels at $2.49. Once the prices move towards the North, to keep it sustaining the resistance of $4.23 levels need to be taken off when accompanied with more than average daily volumes.

Negative operating cashflows and lifetime high stock prices, gives the stock an expensive valuation. Hence we give an 'Avoid' rating on the stock at the closing price of $3.92, up by ~12.32%, as of 11^th August 2021.

Daily Technical Chart – NVX

Source: REFINITIV

Superior Resources Limited (ASX: SPQ)

SPQ is a junior minerals explorer. The company is engaged in the exploration of base metals and gold in northern Queensland, Australia. It holds various exploration permits, exploration permit applications and a granted mining lease in northern Queensland for base metals exploration. The company was incorporated in 2005 and is based in Coorparoo, Australia. The market capitalization stood at $20.72 million at $0.015 per share.

Financial & Operational Highlights –   Recently the company released its quarterly update for the period ending on 30^th June 2021, stating the 8,000m drilling campaign on Steam Engine, Bottletree and Wyandotte started on 17^th June 2021. On the financial front, the company did not receive any cash receipts from the customers for the past 12 months ending on 30^th June 2021. The cash balance decreased in 4Q FY21 to $1.72 million as compared to the $2.01 million for the period ending 31^st March 2021.

Technical Analysis- The stock showed a strong uptrend and printed the recent high of $0.025 and corrected forming range-bound patterns as of now. The relative strength index at 58.057, which is in the middle range of the zone, points for directionless movement, which can eventually lead to a breakout on either side. The 21 days simple moving average is hovering below the stock price at $0.014, which implies the further upside movement of the stock from current levels. For the prices to prohibit from diving into the bear territory, the support of $0.012 should be held firmly. The resistance is plotted on the charts at $0.018.

Due to a lack of operating revenues, declining cash balances, and elevated stock prices, we give the stock the rating of ‘Avoid’ at the closing price of $0.015, as of 11^th August 2021.

Daily Technical Chart – SPQ

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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