Stocks’ Details

Castile Resources Ltd

Establishment of Share Sale Facility: Castile Resources Ltd (ASX: CST) is a mineral exploration company with a market capitalisation of $73.89 Mn as on 22^nd September 2020. Recently, the company notified the market that it has established a share sale facility for holders of less than a marketable parcel of shares in the issued capital of the company. The company added that the holder can sell its shares without difficulty, as well as without incurring any costs.  The company is likely to decrease its administrative costs associated with maintaining such a large number of relatively small holdings on its share register.

Commencement of Drilling: In another update, the company announced that it has commenced drilling on the Rover 1 Gold Project. CST expects that drilling will continue with two shifts per day, seven days a week for the remainder of the field (dry) season. During June 2020 quarter, the company finished the initial metallurgical review for Rover 1 Pre-Feasibility Study. However, the company was unable to complete any drilling on the Rover 1 Gold Project, due to COVID-19 restrictions and border lockdowns. Exploration expenditure for the period stood at $0.256 million. As on 30^th June 2020, the cash balance of the company stood at $17.23 million.

Cash Flow from Operating Activities (Source: Company Reports)

Growth Strategy: The primary exploration strategy of the company revolves around Rover Mineral Field by targeting IOCG mineralisation via the reinterpretation of the regional controls on known mineralisation and reinterpretation of an extensive set of geophysical survey data.

Stock Recommendation: In the past three and six months, the stock of CST has moved up by 184.62% and 386.84%. As a result, the stock is inclined towards its 52-week high level of $0.390. In addition, the stock is trading at a price to book value multiple of 5.6x as compared to the industry median (Basic Materials) of 2.5x on TTM basis. On a technical front, the stock of CST has a support level of ~$0.329 and a resistance level of ~$0.375. Therefore, considering the price movement in the past months and current trading levels, we give an “Expensive” recommendation on the stock at the current market price of $0.350 per share, down by 5.405% on 22^nd September 2020. We further suggest investors to wait for better entry levels.

Kingston Resources Limited

Project Manager Passed Away: Kingston Resources Limited (ASX: KSN) is engaged into mineral explorations. The market capitalisation of the company stood at $57.64 Mn as on 22^nd September 2020. Recently, the company notified the market about the demise of Gallipoli Exploration Project Manager, Charles Yobone. The company added that Charles was an integral part of the company’s success in recent years in advancing the Misima Gold Project.

Reduction in Losses: During FY20, the company managed to deliver numerous key milestones as it works towards its objective of becoming a gold producer. These achievements include the commencement of the Pre-Feasibility, which is now underway at its flagship Misima Gold Project. The company reported statutory after-tax loss amounting to $751,587 as compared to a loss of $2,240,006 in FY19. The reduction in loss was supported by reduced levels of expenditure as well as a gain on the sale of exploration assets. In the month of August 2020, the company wrapped up the placement of the shortfall from the Entitlement Offer and raised $3.1 million before fees. Moreover, the company previously finished capital raising of $8.4 million comprising of $6.4 million from placement and $2.0 million from Share Purchase Plan.

Key Financials (Source: Company Reports)

Outlook: The company is on track to become a significant new ASX-listed gold developer operating in the Asia-Pacific region over the next 12 months. KSN will continue its evaluation of its mineral projects and undertake generative work in order to identify and potentially acquire new resource projects. The company has scheduled to conduct its Annual Shareholders Meeting on 4^th November 2020.

Stock Recommendation: As on 30^th June 2020, the cash balance of the company stood at ~$6.5 million. The stock of KSN has moved up by 66.67% and 257.14% in the last three and six months, respectively. The 52-week low-high range for the stock stands at $0.070-$0.300. On a technical front, the stock of KSN has a support level of ~$0.225 and a resistance level of ~$0.260. Thus, considering the stock movement in the past months and current trading levels, we give an “Expensive” rating on the stock at the current market price of $0.240 per share, down by 4% on 22^nd September 2020.

DiscovEx Resources Limited

Growth in Net Cash Position: DiscovEx Resources Limited (ASX: DCX) is involved in the exploration for gold and base metals. The market capitalisation of the company stood at $9.57 Mn as on 22^nd September 2020. During FY20, the company reported a net loss after provision for income tax of $4,586,630 as compared to a loss of $39,957 in FY19. This includes mineral exploration expenditure impaired and written off amounting to $3,777,623. The net cash position of the company was increased by around $400,000, mainly due to the proceeds from capital raisings as well as disposal of listed securities surpassing the cash outflows for exploration and evaluation and administrative expenses. The company closed the year with a cash balance of $909,506, nil corporate debt and minimal non-discretionary long-term commitments.

Financial Summary (Source: Company Reports)

Outlook: The company is planning to expand its presence in this world-class gold district. In addition, DCX remains focused on utilizing its funding in the most efficient manner, committing as much as possible to in-ground activities as well as limiting the administrative burden for shareholders.

Stock Recommendation: Due to exploration write-offs and impairments, the company experienced a fall in net assets to $1,464,620 in FY20 from $4,176,349 in FY19. The stock of DCX has moved up by 166.67% in the last one month. As a result, the stock is trading near to the 52-week high level of $0.011. On a technical front, the stock of KSN has a support level of ~$0.007 and a resistance level of ~$0.009. Therefore, considering the rising losses, low market capitalisation and price movement in the stock in the past period, we suggest investors to avoid the stock at the current market price of $0.008 per share on 22^nd September 2020.

Oakdale Resources Limited

Progress in Drilling Operations: Oakdale Resources Limited (ASX: OAR) is involved in mining exploration with the objective of developing a viable graphite mining operation and graphite project located on Central Eyre Peninsula in South Australia. The market capitalisation of the company stood at $50.5 Mn as on 22^nd September 2020. Recently, the company stated that diamond drilling operations at the Lambarson Canyon Project are progressing well. The company added that the drilling of the first hole is targeting an outcropping high-grade quartz breccia well underway. The Initial drill is highly encouraging, which reflects that the geology is consistent with the structural target zone, which hosts gold mineralisation at surface.

Capital Raising: OAR has raised $2,200,000 through a placement to institutional funds, professional and sophisticated investors at an issue price of $0.021, which reflects a premium of 31% to the 10-day VWAP of OAR. The company intends to utilize the funds to finish drilling at Lambarson Canyon, Douglas Canyon, Nevada, and general exploration work for the Crown Project in the Julimar District.

A Look at June 2020 Quarter: During June 2020 quarter, the company has also completed entitlement offer, through which it raised $1.4 million with oversubscribed shortfall placement. These funds allow the company to design an initial exploration program for Crown PGE-Nickel-Copper project and Nevada gold drilling and Peru Chimu gold project. The net cash used in the operating activities stood at $220k and closed the quarter with a cash balance of $1.34 million.

Cash Flow Activities (Source: Company Reports)

Future Focus: The company is focused on the planned levels of operational and exploration expenditures, as well as its ability to manage cash outflows within the available funding. The company has scheduled to conduct its Annual Shareholders Meeting on 26^th November 2020.

Stock Recommendation: Over the past few year, the company experienced deterioration in its key margins (Gross, EBITDA and Net Margin). The stock of OAR has moved up by 520% and 1140% in the past one and three months, respectively. As a result, the stock is inclined towards its 52-week high levels of $0.033. On a technical front, the stock of OAR has a support level of ~$0.018 and a resistance level of ~$0.032. Therefore, considering the leveraged balance sheet, higher cash cycle and current trading levels, we suggest investors to avoid the stock at the current market price of $0.027 per share, down by 12.903% on 22^nd September 2020 owing to the drilling update.

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.