Stocks’ Details

Cobalt Blue Holdings Limited

Inclusion of BHCP in Australian Government Critical Minerals Prospectus 2020: Cobalt Blue Holdings Limited (ASX: COB) is engaged in the exploration and development of cobalt. The market capitalisation of the company stood at $23.50 Mn as on 5^th November 2020. Recently, the company notified that its Broken Hill Cobalt Project (BHCP) has been incorporated in the Australian Government Critical Minerals Prospectus 2020 and NSW Government Minerals Strategy. The company added that the Government of Australia would be using the Prospectus to attract investors and off-takers on the opportunities in the critical minerals sector of Australia. This initiative by the Government for the minerals sector may create a headroom for the company.  During September 2020, the company reported a growth of 55% in ore reserves to 71.8 Mt at Broken Hill Cobalt Project. Net cash used in the operating activities stood at $510k and 430k from investing activities in September 2020 quarter.

Cash Flow (Source: Company Reports)

Improvement in Losses: During FY20, the company reported interest revenue amounting to $14,000 as compared to $59,000 in FY19. In addition, net loss for the year amounted to $2,384,000 against $2,909,000 in FY19. This improvement in losses was supported by lower employee benefits expenses of $92,000, lower legal and professional costs of $201,000 and lower corporate costs of $186,000.

Outlook: Looking forward, the company is opportunistic regarding land acquisitions. In addition, the strategic focus of the company revolves around producing a premium battery ready cobalt product in order to enter the production chain directly. The company has scheduled to conduct the 2020 Annual General Meeting on 27^th November 2020.

Stock Recommendation: The company closed the September 2020 quarter with cash and cash equivalents of ~$8.1 million. In the past three and six months, the stock of COB has corrected 9.09% and 13.04%, respectively. As a result, the stock is trading towards its 52-week low level of $0.076, offering decent opportunities for accumulation. In addition, the stock is trading at a price to book value multiple of 1.2x as compared to the industry median (Basic Materials) of 2.5x on TTM basis. On a technical front, the stock of COB has a support level of ~$0.079 and a resistance level of ~$0.174. Therefore, in light of the recent inclusion of BHCP in Australian Government Critical Minerals Prospectus 2020, improved bottom-line, current trading levels and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.100 per share up by 1.010% on 5^th November 2020.

Estrella Resources Limited

Discovery of High-Grade Magmatic Nickel Sulphide: Estrella Resources Limited (ASX: ESR) is involved in the exploration and development of nickel projects. The market capitalisation of the company stood at $106.34 Mn as on 5^th November 2020. Recently, the company has received laboratory assay results from the anticipated diamond drill core CBDD030, which affirms the discovery of high-grade nature of the magmatic nickel sulphides intersected at the T5 Prospect. The company added that results boost the potential for mineralisation to be high-grade and low in deleterious elements.

Assay Result Highlights (Source: Company Reports)

Sale of Munda Gold Project: During September 2020 quarter, the company was focused on Target-5 diamond drilling program at the Carr Boyd Layered Complex (CBLC), preparations for the continued exploration of the T-5 nickel discovery, as well as 5A exploration planning. In addition, the company also finished the sale of Munda gold project for total upfront and deferred consideration of $1.9 million (ex GST) to Auric Mining Limited. This would enable ESR to concentrate exploration efforts on its substantial nickel projects. However, the company has received $1.24 million (plus GST) from Auric Mining Limited.  

FY20 Financial Highlights: During FY20, the company reported a net loss of $609,676, which was slightly lower than the loss of $622,143 incurred in FY19. During the year, ESR reported a net cash outflows from operating activities of $484,357 and closed the year with a cash balance of $36,479.

Key Financials (Source: Company Reports)

Outlook: Looking forward, ESR is seeking opportunities to realise or create value via its existing assets. In addition, the company is also undertaking due diligence on new domestic resource project opportunities.

Stock Recommendation: As on 30^th September 2020, the cash balance of the company stood at $2.2 million. The 52-week low-high range for the stock stands at $0.005 - $0.250, respectively. In the last one and three months, the stock has surged 667.85% and 795.83%, respectively. In addition, the stock is trading at a price to book value multiple of 26.5x as compared to the industry median (Metals & Mining) of 2.6x on TTM basis. On a technical front, the stock of ESR has a support level of ~$0.097 and a resistance level of ~$0.16. Therefore, in light of the business losses, steep movement in the prices and current trading levels, we advise the investors to avoid the stock at the current market price of $0.105 per share, down by 22.223% on 5^th November 2020, owing to the recent release of assay results.

Galileo Mining Ltd

Positive Diamond Drilling Results: Galileo Mining Ltd (ASX: GAL) is in the exploration of mineral resources with a market capitalisation of ~$31.48 Mn as on 5^th November 2020. Recently, the company stated that diamond drilling results at Lantern South prospect have confirmed discovery of significant High-Grade Magmatic Nickel Sulphide.  The highlights of the results can be seen in below picture:

Results Highlight (Source: Company Reports)

September Quarter Highlights: During the quarter ended September 2020, the company has finished a diamond drilling campaign to test deeper nickel prospective targets under shallow cover. GAL also finished RC drilling campaign to test mineralisation and establish diamond drilling pre-collars. The net cash outflow from the operating activities stood at $37k. During FY20, the company reported a net loss after income tax of $912,561 as compared to $1,097,116 in FY19.

Cash Flow from Operating Activities (Source: Company Reports)

Outlook: For the December 2020 quarter, the company is expecting an exploration expenditure of around $1.0 million. In addition, the company would continue its evaluation of mineral projects and undertake generative work in order to identify and acquire new resource projects and opportunities. The company is likely to conduct 2020 Annual General Meeting on 25^th November 2020.

Stock Recommendation: The company is in a decent position to continue exploration supported by a cash balance of around $7.7 million as on 30^th September 2020. This places GAL in a secure position to undertake all its planned exploration programs. The stock of GAL has corrected 34.78% and 8.16% in the last three and six months, respectively. The 52-week low-high range for the stock stands at $0.100 - $0.450, respectively. On a technical front, the stock of GAL has a support level of ~$0.200 and a resistance level of ~$0.277.  Thus, considering the nil debt to equity ratio, decent liquidity position, encouraging diamond drilling results and correction in past months along with key risks, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.230 per share, up by 4.545% on 5^th November 2020.

White Cliff Minerals Limited

Acquisition of Reedy South Gold Project:  White Cliff Minerals Limited (ASX: WCN) is involved in the exploration of minerals with a market capitalisation of $15.49 Mn as on 5^th November 2020.  Recently, the company has finished an initial geochemical sampling program at the Midas Cu-Au Project, which was focused on 5 of the 7 priority target areas identified by earlier studies, including the Coolbro Creek prospect. In the month of October 2020, the company finished the acquisition of the Reedy South Gold Project from Harley James Sears and Wakeford Holdings Pty Ltd and Bonanza Resources Pty Ltd, which was announced on 14 September 2020. During FY20, the company recorded a net profit of $1,813,888 as compared to the loss of $2,075,964 in FY19. This turnaround was mainly supported by the gain of $670,318 from the sale of financial assets.

Financial Summary (Source: Company Reports)

Outlook: The company is engaged in the discussions for the potential divestment of non-core projects. The company has scheduled to conduct its 2020 Annual Shareholders Meeting on 29^th November 2020

Stock Recommendation: As on 30^th September 2020, the cash balance of the company stood at around $3.80 million. The stock of WCN has moved up by 200% and 650% in the last three and six months, respectively. As a result, the stock is inclined towards its 52-week high level of $0.055. In addition, the stock is trading at a price to book value multiple of 4.1x as compared to the industry median (Metals & Mining) of 2.6x on TTM basis. On a technical front, the stock of WCN has a support level of ~$0.022 and a resistance level of ~$0.055.   Therefore, considering the current trading level, steep price movement and higher valuation, we are of the view that most of the positive factors have been discounted. Hence, we give an “Expensive” rating on the stock at the current market price of $0.029 per share, down by 3.334% on 5^th November 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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