Castillo Copper Limited

CCZ Details

Extension of Key Discovery at Big One Deposit: Castillo Copper Limited (ASX: CCZ) is engaged in the exploration of base metals such as copper, nickel, and cobalt. CCZ operates copper projects in Queensland & New South Wales (NSW) in Australia, and in Zambia. As on 12^st February 2021, the market capitalisation of the company stood at ~$53.95 million. On 11 February 2021, the company notified ASX of issue of 1 million fully paid ordinary shares under section 708 (A) (5) (e) of the Corporations Act. It issued these shares upon the exercise of unlisted options at an exercise price of $0.05 per option, thereby converting to 1 fully paid ordinary share. On 10 February 2021, CCZ confirmed the market of a further extension to known mineralisation at Big One Deposit within the Mt Oxide Project in Queensland following a recent news of a major discovery. 

December 2020 Quarter Activities: During the quarter, the company started drilling on the Big One Deposit and identified 303RC and 301RC as the best intercepts. During Q2FY21, CCZ paid $513k in consultants fees. For its Zambia Projects, the company identified sampling at Mkushi Project up to 4.2km strike next to operating copper mine. During the review period, no material work was undertaken on the NSW assets, consisting of Cangai Copper Mine and Broken Hill Alliance tenure. The company got all tenures successfully renewed for 5 years and paid $27k as consultants fees and $215k for the acquisition of Broken Hill tenements from Wyloo Metals. The company held cash of $3.11 million as on 31 December 2020 and used $354k net cash in the operating activities during the quarter.

Cash Flows from Operating Activities, Highlights (Source: Company Reports)

Outlook: From the holistic review of assays, all the 3 drilling campaigns verified high quality nature of Big One Deposit and possibility to scale. The company is now planning an IP survey and JORC modelling on the site as the next steps on Mt Oxide project.

Stock Recommendation: The stock of CCZ gave a positive return of 194.11% in the past nine months as well as in the past 1 year. The stock is currently trading slightly above the average of its 52-weeks price level of $0.006-$0.083. The stock of CCZ has a support level of ~$0.047 and a resistance level of ~$0.056. On TTM basis, we have valued the stock using price to book value multiple of ~6.4x as compared to industry average of ~3.7x and thus seems overvalued. Considering the high returns in the past months, no material revenue from projects from FY16-FY20, and valuation on TTM basis, we are of the view that most of the key catalysts have been factored in at current juncture. Hence, we suggest investors to wait for better entry levels and give an ‘Expensive’ rating on the stock at the current market price of $0.050, down by 5.661% on 12^th February 2021.

CCZ Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

BlackEarth Minerals NL

BEM Details

Signed Agreement with Luxcarbon GmbH: BlackEarth Minerals NL (ASX: BEM) is engaged in the mineral development & exploration of graphite, and acquisition of resource projects and assets. As on 12^th February 2021, the market capitalisation of the company stood at ~$33.03 million. On 11 February 2021, the company notified ASX regarding the issuance and allotment of 2 million fully paid ordinary shares under section 708 (A) (5) of the Corporations Act. The issue was due to exercise of 2 million unlisted options at an exercise price of $0.08 cents per share for $160k, received value by the company. On 10 February 2021, the company announced entering graphite supply and marketing agreement with Luxcarbon GmbH initially for 3 years to source and supply upto 25kmt per year of high-grade concentrate. Luxcarbon GmbH will exclusively market and distribute BEM and its JVs produced material in European markets.   

Q2FY21 Results and Activities: During December 2020 quarter, the company undertook exploration work at Northwest (NW) Razafy prospect. It completed a drill program to further explore the graphite discovery lying to the NW of the Razafy resource. With this the company plans to extend exploration along the known mineralisation within the ‘Razafy Domain’ to greater than 5km in length. BEM will confirm the start of this drill program in the short term. During the quarter, BEM undertook exploration on Donnelly River Project, confirmed design and plan for an airborne electromagnetic survey for Jan-Feb 2021, subject to discussion with landowners.

During Q2FY21, BEM announced closure of its oversubscribed placement to institutional investors. In total, BEM raised more than $1.81 million from a Share Purchase Plan and Placement to investors during the quarter. The company holds ~$2.03 million cash and cash equivalents as on 31 December 2020. 

Cash Flows from Financing Activities, Highlights (Source: Company Reports)

Outlook: The down-stream development plan is a priority for BlackEarth and BEM looks forward to updating the market on this in the short term. The company plans to deploy funds raised from aforesaid sources to develop its assets- ongoing evaluation of the Donnelly River project and the planned drill program in Madagascar.

Stock Recommendation: The stock of BEM gave a positive return of 293.61% in the past three months and a positive return of 362.50% in the past six months. The stock is currently trading slightly above the average of its 52-weeks price band of $0.021-$0.28. The stock of BEM has a support level of ~$0.173 and a resistance level of ~$0.199. On TTM basis, we have valued the stock using price to book value multiple of ~16.6x as compared to industry average of ~3.7x and is thus seems overvalued. Considering net loss from FY17-FY20, significant returns for 3 months and 6 months, current trading level and valuation on TTM basis, we are of the view that most of the key catalysts have been factored in at current juncture. Hence, we suggest investors to wait for better entry levels and give an ‘Expensive’ rating on the stock at the current market price of $0.185 on 12^th February 2021.

BEM Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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