Stocks’ Details

Xstate Resources Limited

Gas Discovery at Borba: Xstate Resources Limited (ASX: XST) is engaged in the Oil & Gas exploration and evaluation segment in the United States. The Company has a working interest (WI) in Rancho-Capay Gas Field, Alvares Prospect, California AMI Prospects, and Los Medanos Gas Field, all of which are in Sacramento Basin onshore Northern California. As per the company report, XST has further drilled 30 metre below the measured depth of 1,879 metre, indicating a higher gas production of 385 units over 10 units of gas estimated previously at Borba 1-7 well. XST has also reported the presence of ethane for the first time in the gas stream. The company will continue with the drilling for further exploration opportunities.

Acquired Additional Interest in Projects for Higher Production: Xstate has acquired an interest in various projects in the Sacramento Basin onshore California to discover exploration opportunities. The company has reported gross production of 357mcf/day during December 2020 quarter as compared with 349 mcf/day during the September 2020 quarter. The company has acquired a further 10% interest in Red Earth, taking its total interest to 25%, which consists of six oilfields at north of Edmonton. XST has acquired the additional interest for a total consideration of CAD 700,000 and A$150,000 in Xstate shares, which is subject to the shareholder’s approval.

Reserve Table (Source: Company Reports)

Outlook: XST will continue with drilling at Borba in Q1 2021 to meet its target reservoir. At the same time, the company is planning to venture into new prospects to secure producing assets, which may amplify revenues for the company. The company will be utilising $905,000 (raised in November 2020) to meet its working capital requirements and acquiring a higher interest in Red Earth, going forward.

Stock Recommendation: In the last three months, XST has increased by ~180% and by ~366.67% in the last six months. The current market capitalisation of XST stands at ~$37.65mn as of 24 March 2021. The stock is currently trading above the average 52-weeks’ price level range of $0.001-$0.023. On a TTM basis, the stock of XST is trading at an EV/Sales multiple of 40.7x, higher than the industry median (Oil & Gas) of 39.4x. On the technical analysis front, the stock has a support level of ~$0.013 and a resistance of ~$0.015. Considering the steep price movement in the past months, further drilling for exploration opportunities, and current trading levels, we are of the view that most of the positive factors have been discounted at current trading levels. Hence, we suggest investors to wait for better entry level and give an “Expensive” rating on the stock at the closing price of $0.014 as of 24 March 2021. 

Surefire Resources NL

Commencement of Drilling at Yidby Road Gold Project: Surefire Resources NL (ASX: SRN) is engaged in base metals exploration. For the purpose, the company holds exploration assets in Western Australia. Its projects include Kooline Lead - Silver Project, Vanadium Resources, Yidby Gold Project, and Perenjori Gold Project. The company has informed the market regarding the commencement of the drilling at Yidby Road Gold Project situated at south of Yalgoo-Singleton Greenstone Belt. The project is surrounded with other gold resources projects such as Minjar Gold Project, Kirkalocka Gold Project, Mount Gibson Gold Project, and Rothsay Gold Project, located within 70 km of radius. The drilling programme at Yidby Gold Road Project will be focusing on RC drilling for high- grade mineralised zone at North Western and South Eastern directions.       

Financial Highlights for 1HFY21: SRN has reported Nil operating revenue in 1HFY21. The company has registered a net loss of $1.6mn in 1HFY21 as compared with a net loss of $0.70mn in 1HFY20. The company has a strong balance sheet with cash and cash equivalents available at $3.4mn as on 31 December 2020 as compared with $0.19mn as on 30 June 2020. The total liabilities declined from $0.83mn at the end of 1HFY20 to $0.61mn at the end of 1HFY21. The company has posted higher reserves of $0.38mn as on 1HFY21 as compared with $0.05mn as on 1HFY20. 

Increase in Cash (Source: Company Reports)

Outlook: The company is planning to commence a new drilling programme in Q1FY21 at a high-grade gold mineralised zone. The drilling will also test the extensions of this regional scale and the level of mineralised reserves. 

Stock Recommendation: In the last one month, SRN has decreased by 12.90% and increased by 8.0% in the last three months. The current market capitalisation of SRN stands at ~$29.62mn as of 24 March 2021. The stock is currently trading above the average 52-weeks’ price level range of $0.001-$0.052. On the technical analysis front, the stock has a support level of ~$0.024 and resistance of ~$0.029. Considering an increase in net loss in 1HFY21, absence of revenues, low market capitalisation, initial stage of drilling at Yidby Road Gold Project, and current trading levels, we give an “Avoid” rating on the stock at the closing price of $0.027 as of 24 March 2021. 

Riversgold Limited

Commencement of Diamond Drilling at Queen Lapage: Riversgold Limited (ASX: RGL) is engaged in gold exploration in Australia. The company is engaged in exploring and developing of various mineral explorations. The company's projects include kurnalpi project, alaskan project, churchill dam project, cambodia gold project, and cambodian project. The company has recently updated the market regarding its commencement of diamond drilling programme at Queen Lapage, situated at Lake Yindarlgooda. The company will be commencing a 3000m of diamond drilling at the site, for which, they have conducted a 3D seismic survey, which has provided fluid path for mineralised fluids and potential sites for Gold reserves.

Financial Highlights for 1HFY21: RGL has reported a significant growth in its revenues at $0.36mn in 1HFY21 as compared with $266 in 1HFY20. The company has registered a net loss of $0.31mn in 1HFY21. Cash and cash equivalents at the end of 1HFY21 stood at $1.60mn as compared with $1.27mn in 1HFY20. The company has seen a decline in its total liabilities to $0.17mn as at 1HFY21 as compared with $0.33mn as at 1HFY20.

Increase in Cash (Source: Company Reports)

Outlook: The company remains confident on estimating the potential discovery of gold reserves under the Lake Yindarlgooda, which in turn will aid the company to discover gold reserves in Eastern Goldfields. 

Stock Recommendation: In the last one month, RGL has increased by 20.0% and by 2.12% in the last three months. The current market capitalisation of RGL stands at ~$19.17mn as of 24 March 2021. The stock is currently trading below the average 52-weeks’ price level range of $0.008-$0.115. On a TTM basis, the stock of RGL is trading at a Price/Book Value multiple of 3.0x, higher than the industry median (Metals & Mining) of 2.7x. On the technical analysis front, the stock has a support level of ~$0.043 and a resistance of ~$0.052. Considering the registered loss in 1HFY21, nil dividends to the investors, relatively lower market capitalisation, and current trading levels, we give an “Avoid” rating on the stock at the closing price of $0.048 as of 24 March 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

Note: Surefire Resources NL (Company) is a client of Kalkine Media Pty Ltd (Kalkine Media), an affiliate of Kalkine. However, under no circumstances have Kalkine or its related entities been, directly or indirectly influenced in making any related insights concerning Company as contained in this report, and no form of compensation is or will be received by Kalkine, Kalkine Media or Kalkine’s other related entities for the publication of this report.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine do not hold interests in any of the securities or other financial products covered on the Kalkine website.