Stocks’ Details

Leigh Creek Energy Limited

Receipt of Petroleum Production Licence: Leigh Creek Energy Limited (ASX: LCK) is engaged in the exploration and development of energy and minerals. The market capitalisation of the company stood at ~$118.47 million as on 11^th December 2020. Recently, the company notified the market that it has been qualified as a signatory to the United Nations Global Compact, which happens to be the largest corporate sustainability initiative in the world. On 25^th November 2020, the company announced that the South Australian Government has given a Petroleum Production Licence (PPL) and an Associated Activities Licence (AAL) for the Leigh Creek Energy Project (LCEP). The company added that AAL allows access to roads and infrastructure as required for conducting the operations on the PPL. During Q1 FY21, the company recorded net cash used in operating activities of $1.2 million primarily after payment of $726k and $521K for staff costs and administration and corporate costs, respectively.

Cash Flows (Source: Company Reports)

Outlook: Looking forward, the company is focused on progressing the development of the LCEP. The company would also work to advance its upstream syngas production Environmental Impact Report (EIR) and Statement of Environmental Objectives (SEO)

Stock Recommendation: The company closed Q1 FY21 with a cash balance of $5.02 million. In the last three and six months, the stock of LCK has moved up by 120.23% and 96.80%, respectively. As a result, the stock is trading towards its 52-weeks high level of $0.220. On a TTM basis, the stock is also trading at a price to book value multiple of 3.5x against the industry median of 1.4x. On a technical analysis front, the stock has a support level of ~$0.078 and a resistance level of ~$0.219.  Hence, considering the steep price movement in the stock within the past few months and higher valuation, we are of the view that most of the positive factors have been discounted at the current trading level and give an “Expensive” rating on the stock at the current market price of $0.185 per share, up by 2.777% on 11^th December 2020. We further suggest investors to wait for better entry levels.

Rox Resources Limited

Gold Exploration Results: Rox Resources Limited (ASX: RXL) is involved in the exploration of gold and nickel. The market capitalisation of the company stood at ~$102.49 million as on 11^th December 2020. Recently, the company noted an announcement made by its Joint Venture partner Venus Metals Corporation Limited in relation to the results of the recent reverse circulation (RC) drilling program at the Hope, Shed Bore, Taylor’s Reef and Sovereign gold prospects. From Hope Gold Prospect, the company recorded the best results, which include YSRC026 1m @ 9.30 g/t Au from 103m and YSRC020 3m @ 1.53 g/t Au from 45m. Taylor’s Reef Gold Prospect include CFRC087 3m @ 4.29 g/t Au from 132m including 1m @ 7.98 g/t Au from 132m.

During Q1 FY21, the company incurred $2.205 million for exploration. The company also made payments to related parties of the entity and their associates of $0.210 million. The net cash used in the operating activities stood at ~$2.78 million. During FY20, the company witnessed a rise in losses to $7,469,580 from $2,790,816 in FY19.

Cash Flow (Source: Company Reports)

Outlook: Going forward, the company would be focused on the development of the Youanmi Gold Project. It would also be focused on the advanced exploration on regional targets.

Stock Recommendation: As on 30^th September 2020, the cash balance of the company stood at $8.04 million. On a TTM basis, the stock of RXL is trading at a price to book value multiple of 4.6x, which is higher than the industry median of 2.8x. In addition, the stock has also surged by 96% in the last six months. On a technical analysis front, the stock has a support level of ~$0.023 and a resistance level of ~$0.055.  Thus, considering the rising losses, higher valuation and absence of revenue, we advise investors to avoid the stock at the current market price of $0.049 per share, down by 2.001% on 11^th December 2020.

St George Mining Limited

Identification of Multiple New EM Conductors: St George Mining Limited (ASX: SGQ) is involved in the exploration and development of gold, copper, uranium and nickel in Australia. The market capitalisation of the company stood at ~$57.90 million as on 11^th December 2020. Recently, the company has notified the market that it has recognised multiple new EM conductors via ongoing exploration at its flagship Mt Alexander Project. This proved as an exciting exploration result which is likely to further support the potential to discover nickel-copper sulphide mineralisation proximal to the holes. For the quarter ended 30^th September 2020, the company reported net cash outflow from operating activities of $1.90 million and $56k from investing activities. During FY20, the company reported a loss amounting to $8,584,901 as compared to $9,594,528 in FY19.

Cash Flow (Source: Company Reports)

Stock Recommendation: At the end of Q1 FY21, the cash and cash equivalents of the company stood at $6.33 million. Current ratio of the company stood at 6.68x in FY20 as compared to 0.83x in FY19. This indicates that the company has improved its position to settle its short-term obligations. In the last one month, the stock of SGQ has corrected 22.58%. On a technical analysis front, the stock has a support level of ~$0.099 and a resistance level of ~$0.175. Thus, considering the decent liquidity position, identification of multiple new EM conductors, correction in one month and the key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.120 per share, up by 4.347% on 11^th December 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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