Core Lithium Ltd (ASX: CXO)

CXO is involved in mineral exploration and deals in zinc, silver, gold, uranium, copper and lead projects. It operates Finniss Lithium Project and other projects in the Northern Territory and South Australia. Incorporated in 2010, its market capitalization stood at AUD 884.48 million as of 8^th December 2021.

Financial & Operational Updates – On 8^th December 2021, it has entered into an agreement to purchase six Mineral Licenses (MLs) including 30 historic pegmatite mines adjacent to Finnis. As per 2021 Annual General Meeting Presentation released on 25^th November 2021, construction has started on its newest lithium mine at Finnis Lithium Project and its first production of lithium concentrate is scheduled for 4QFY22, where the DMS will commence in March 2022. The Finnis Lithium Project is fully funded with AUD 150 million capital raise. On 22^nd October 2021, Ganfeng New Energy Technology Development (Suzhou) Co. Ltd. (Gangfeng) and each of the entities became its substantial shareholder.

As per its quarterly report on 22^nd October 2021, its sales receipts for 1QFY22 were reported as nil and closed the quarter with a cash balance of ~AUD 136.67 million at the end of 30^th September 2021 versus ~AUD 38.19 million at the end of 30^th June 2021. As per the Annual Report released on 21^st September 2021, revenue from other income was reported as ~AUD 0.315 million in FY21 versus ~AUD 0.214 in FY20. The company reported a total loss of ~AUD 2.91 million, as compared to total loss of ~AUD 4.39 million in FY20.

Technical Analysis: On the weekly chart, CXO's prices are sustaining above an upward sloping trend line and recently started to move upward after taking the support of the same trendline, giving a positive stance. Moreover, prices are trading above 21-period SMA and 50-period SMA which may act as the support levels for the stock. The RSI (14-period) is trading in positive territory at ~60.765 levels. An immediate support level is at AUD 0.470, while the resistance level is AUD 0.60.

Valuation Methodology: P/B Multiple Based Relative Valuation (Illustrative)

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: CXO has provided ~186.49% of return in past nine months and is trading above the average 52-week price level band of AUD 0.079 and AUD 0.675. The stock has been valued using P/B multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in % terms). For the purpose of valuation, peers like Vulcan Energy Resources Ltd (ASX: VUL), Piedmont Lithium Inc (ASX: PLL), Pilbara Minerals Ltd (ASX: PLL), and others have been considered. The company can trade at a slight discount to its peers, considering its net losses for FY21 and negative ROE. After considering its updates on its Finnis Lithium Project, upside potential as indicated by the valuation, the investors with a high-risk appetite can consider it as a ‘Speculative Buy’ along with incorporating the support and resistance as one of the tools while analysing the investment opportunity. The stock was analysed as per the closing price of AUD 0.530 per share, as of 8^th December 2021. However, the risk levels are extremely high in view of the future findings and its saleability.

Weekly Technical Chart – CXO

Source: REFINITIV

Latrobe Magnesium Limited (ASX: LMG)

By way of using a process of combined hydro-met / thermal reduction, LMG develops a production plant of demonstrating magnesium in Victoria’s Latrobe Valley. Incorporated in 1986, its market capitalization as of 8^th December 2021 stood at AUD 132.82 million.

Financial & Operational Updates – As per the release of 25^th November 2021, architectural drawing, planning of site-clean up and construction RTL subdivision was completed and on the other hand, pre-qualification of construction works and detailed designing and modelling of the reduction furnace area has started at Latrobe Valley Project. As per the market update released on 18^th November 2021, LMG went into an offtake agreement with Metal Exchange Corporation (MEC) which will make MEC an exclusive distributor in the USA, committing ~4,000 tonnes of magnesium per year. It also signed MOU with Advanced Material Corporation of Japan (AMCJ) (a largest titanium and magnesium trading house in Tokyo) which will commit ~4,000 tonnes per year and funding for plant expansion to LMG. It also suggested that if the current magnesium’s price of USD 6,150 per metric tonne sustains for long term, LMG’s EBITDA (estimated) for its 10,000 tpa plant will rise by ~AUD 56 million. Its placement of AUD 11.5 million for its 10,000 tpa plant got completed with oversubscription on 12^th November 2021. As per its quarterly report on 28^th October 2021, its sales receipts for 1QFY22 were reported as nil and closed the quarter with a cash balance of ~AUD 169k at the end of 30^th September 2021 versus ~AUD 954k at the end of 30^th June 2021. As per the Annual Report, its total revenue increased from ~AUD 708.78k in FY20 to ~AUD 846.57k in FY21. Its net losses increased from ~AUD 2.08 million in FY20 to ~AUD 2.35 million in FY21.

Technical Analysis: On the daily chart, LMG stock price witnessed a breakout of the falling trendline support at AUD 0.086 level and sustaining above the same. Moreover, the prices are trading below the trend-following indicator 50-period SMA, indicating a positive momentum. The momentum oscillator RSI (14-period) is trading at ~50.433 level, indicating bullish momentum. An important support level for the stock is placed at AUD 0.077 while the key resistance level is placed at AUD 0.105.

With a view of expansion of its magnesium demonstration plant from 3,000 tpa to 10,000 tpa and increase in revenue estimates and technical levels, the investors with a high-risk appetite might consider a ‘Speculative Buy’ position, incorporating the support and resistance as one of the tools while analysing the investment opportunity. The stock was analysed as per the closing price of AUD 0.087, up by ~2.352% as of 8^th December 2021. However, the risk levels are extremely high in view of the gap between estimated and actual revenue forecasts.

Daily Technical Chart – LMG

Source: REFINITIV

Itech Minerals Ltd (ASX: ITM)

ITM is involved in developing projects in battery and mineral in South Australia. Its projects include Eyre Peninsula Kaolin Project, Campoona Graphite Project, Bartels Gold Project, Nackara Arc Copper Project, Franklyn Kaolin Project and Billa Kalina (IOCG) Project Its market capitalization as of 8^th December 2021 stood at AUD 22.09 million.

Financial & Operational Updates – On 29^th November 2021, a total of 3,000 ppm new rare earth minerals enriched in neodymium and praesidium (used in production of magnets for EV) was found at the South Creek Prospect. As per 22^nd November 2021 announcement, the company updated that its delivered bulk sample of (600kg) run-of-mine (ROM) graphite ore to ANZAPLAN in Germany and its metallurgical test is underway to optimise the production of spherical graphite. The expected results from the test will be delivered in nine months. On 12^th November 2021, after the collection of resampling of the historical drilling, it had confirmed rare earth element mineralisation (REE) of high purity (dual potential) kaolin and ion absorption clay (IAC). As per the Annual Report, its revenue from ordinary activities remained nil. Moreover, it reported net losses of ~AUD 29.51k in FY21. Cash at the end of FY21 was reported as ~AUD 579.95k.

Technical Analysis: Since the stock was listed on ASX in the month of October 2021, its difficult to analyse the scrip Technically. 

After considering the company’s net losses, investing in this stock at such uncertain levels should be taken with calculated approach, hence a ‘Watch’ stance is suggested. The stock was analyzed as per the closing price of AUD 0.235 per share, as of 8^th December 2021.

Weekly Technical Chart – ITM

Source: REFINITIV

Latin Resources Limited (ASX: LRS)

Incorporated in 2008, LRS is a mineral exploration and development company, having projects in Latin America and Australia. Its projects are Noombenberry Halloysite Project, Burdette - Manildra Gold Project, Yarara Copper-Gold Project, The Gundagai Project, Catamarca Lithium Project, Boree Creek Project, Salinas Lithium Project and MT03 Copper Project. Its market capitalization as of 8^th December 2021 stood at AUD 46.92 million.

Financial & Operational Updates – On 18^th November 2021, it signed a binding agreement with CRC CARE to do R&D on technologies related to emission reduction by using its Halloysite mineral at Cloud Nine deposit. This three-year project for AUD 3.2 million will commence in January 2022. On 12^th November 2021, 14 holes drilling at Cloud Nine Project resulted in exceptionally bright zones of Kaolinite high-grade Halloysite. It had closed its 3QFY21 with nil receipts and a cash balance of ~AUD 1.77 million at the end of 30^th September 2021 versus ~AUD 2.70 million at the end of 30^th June 2021. As per the Half Yearly Accounts, its reported net losses of ~AUD 3.99 million in FY21 versus ~AUD 2.29 in FY20.

Priority Offer Update: LRS bought ~24% and became largest shareholder in Solis Minerals Limited by subscribing 2,700,000 shares at CAD 0.20 per share. Based on the Solis’ price at CAD 0.31 as at 30^th June 2021, its investment was valued at CAD 2.6 million. On current date with the news of Solis getting listed on ASX soon, LRS has given a priority offer to its existing shareholders ending on 10^th of December 2021. Though there is no guarantee of allotment, but the available offer consists of total 6,250,000 CDIs (CHESS Depositary Interests) (equivalent to AUD 1.25 million), where one CDI will represent one underlying share of Solis, tradable on ASX. LRS intends to dilute its ~12.65% shares through Solis’ IPO on ASX of ~AUD 6 million.

Solis Minerals Limited: Solis mainly focuses on exploration of copper in Latin America and holds assets in two largest places for copper production i.e., Chile and Peru. Solis is currently trading at CAD 0.195 as of 6^th December 2021, by the ticker SLMN.V on VAN Exchange of TSXV. The IPO on ASX offers total of ~25-30 million CDIs at AUD 0.20 each to raise ~6 million (excluding costs) with a ratio of 1:1 (1 CDI for 1 share).

The priority offer offered to LRS’ eligible shareholders (Australian Residents) doesn’t provide any guarantee of allotment and should be executed as per Shareholder’s discretion.

Daily Technical Chart – LRS

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 Blue colour line reflects the 50-period moving average. SMA helps to identify existing price trend. If the prices are trading above the 50-period, then it shows prices are currently trading in a bullish trend, (Vice – Versa).

The Yellow colour line represents the Trendline.

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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