Stocks’ Details 

Silver Mines Limited

Completed Sale of Webbs and Conrad Projects: Silver Mines Limited (ASX: SVL) is engaged in the mine development and exploration operations in Australia. As of 21 April 2021, the market capitalisation of the company stood at ~$267.36 million. On 6 April 2021, SVL notified that Thomson Resources Limited (ASX: TMZ) became a substantial shareholder in the company. TMZ held 70 million ordinary shares and 15.53% voting rights in SVL. On 31 March 2021, SVL announced the completion of the sale of the Webbs and Conrad Projects to TMZ. The sale consideration involved a $800k to SVL, a consideration of 70 million ordinary shares in two equal tranches, 50 million options in TMZ and a payment equivalent to the cash rehabilitation bonds plus $269k made to SVL.

1HFY21 Financial Highlights: The company reported revenue of $92k during 1HFY21 versus $64k in 1HFY20. It recorded a net loss of $954k in 1HFY21 from operations. During 1HFY21, SVL was engaged in advancing on priority for the drill testing at the Northwest Zone (NZ) and other potential zones connecting the NZ to the Main Zone at the BSP. The drilling program planned at the Barabolar project has been put on hold due to the COVID-19 pandemic. It reported cash receipts of $155k from the customers during 1HFY21. SVL held a cash balance of $7.14 million in 1HFY21.

1HFY21 Financial Highlights (Source: Company Reports)

Key Risks: The company faces the risk of project commercialisation, stiff peer competition, health hazards due to mining and exploration risks, the risk of pandemic restrictions and operating protocols at work.  

Outlook: At BSP, SVL has plans to expand the drilling activities with up to 10k metres of drilling targeting high-grade infill and extension silver mineralisation. At its Barabolar project, SVL is carrying out desktop studies and application of R&D technologies in the project area. At the Tuena project, DEV awaits the compilation and finalisation of the assay results from the reverse circulation (RC) drilling program completed within EL8526 and undertaken at Lucky Hit South and Markham prospects.

Stock Recommendation: The stock of SVL gave a positive return of 36.36% in the past nine months and a positive return of 164.70% in the past six months. The stock is currently trading at its 52-weeks’ average price band of $0.08-$0.365. The stock of SVL has a support level of ~$0.206 and a resistance level of ~$0.241. Considering the current trading levels, the decent results of 1HFY21 (higher top-line, cash receipts), the exploration program planned at the projects for 2HFY21, and associated risks of the pandemic and exploration programs, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.225 on 21 April 2021.

DevEx Resources Limited

Drill Target Identified at Wilga Downs Copper-Gold Project: DevEx Resources Limited (ASX: DEV) is a previously Uranium Equities Limited, is involved in the mineral exploration and evaluation. As of 21 April 2021, the market capitalisation of the company stood at ~$87.62 million. On 20 April 2021, DEV announced that a short-term drill target has been identified at the Wilga Down Gold-Copper project in the Cobar Basin of New South Wales (NSW). The company conducted a down-hole electromagnetic (DHEM) geophysical survey and discovered a large deep off-hole conductor A. Conductor A and near-hole Conductor B will now be drill tested at the project. DEV is also conducting an MLEM (Moving Loop Electromagnetic) survey to assess the complete prospect for more conductors.

A Look at the Half-Yearly Results: The company reported a net loss after tax of $3.29 million during 1HFY21. At its Sovereign Nickel-Copper-PGE Project (100%), DEV finalised the preparations for its first air-core drill testing to be started in February 2021 over the Sovereign Magnetic Complex at the high priority targets. At the Basin Creek Gold Project, DEV completed a 14-hole Reverse Circulation (RC) drilling program at its Main Ridge Prospect. The broad-spaced assay results from drilling demonstrated gold mineralisation closer to the western margin (a gold-bearing structure) in the centre of the Main Ridge Prospect.

In December 2020, DEV completed raise of $8.4 million via placement of 36.6 million fully paid ordinary shares at $0.23 per share to institutional investors. It held cash and cash equivalents of $11.90 million as of 31 December 2020.

1HFY21 Result Highlights (Source: Company Reports)

Key Risks: The company is exposed to the risk of discovering drill targets at its key operating projects, seeking exploration approvals, raising funds for exploration programs, and interpret the drilling results correctly.

Outlook: At the Sovereign Project, DEV had informed plans for an air-core drill testing to target high priority anomalies such as Hudson, Kingsley, and Mackenzie. DEV had also planned to commence a partially completed field based MLEM survey. At its Basin Creek Gold Project, DEV plans for a detailed exploration programme at its Main Ridge Prospect.

Stock Recommendation: The stock of DEV gave a positive return of 40.47% in the past month and a positive return of 151.06% in the past nine months. The stock is currently trading higher than the 52-weeks’ average price level band of $0.078-$0.37. The stock of DEV has a support level of ~$0.281 and a resistance level of ~$0.311. On a TTM basis, the stock of DEV is trading at a price to book value multiple of 7.1x higher than the industry (Energy) median 2.1x, thus seems overvalued. Considering the current trading levels, significant returns for the past month and nine months, high current ratio, and valuation on a TTM basis, we believe that most of the company’s positives have been factored in at the current levels. Hence, we suggest investors wait for better entry levels and we give an ‘Expensive’ rating on the stock at the current market price of $0.295, down by 4.839% on 21 April 2021.

Mount Ridley Mines Limited

Drilling Program Commenced at Weld Range West Iron (WRWI) Project: Mount Ridley Mines Limited (ASX: MRD) is a mining and exploration company operating Mount Ridley (MR) project and the WeldRange West Iron project (WRWI) in the Fraser Range region. As of 21 April 2021, the market capitalisation of the company stood at ~$38.01 million. On 21 April 2021, the company announced the commencement of drilling at its wholly-owned WRWI Project. It will drill up to 50 reverse circulation holes for testing four targets. It has a drilling schedule for ~3 weeks and expects the initial results by May end. The drilling program targets direct-shipping iron ore, and the project area is prospective for iron ore and gold.

Firm Commitments Received for WRWI Project: On 29 March 2021, MRD announced the receipt of corporate commitments from institutional investors for placement of $858k at $0.0025 per share. It plans to deploy fund for the drilling program at the WRWI project scheduled for Mid-April. 

A Look at the 1HFY21 Financials: The company has reported a revenue of $5k from continuing operations during 1HFY21. It also earned a dividend income of $24k for the period. It reported an NPAT of $242k in 1HFY21 versus $ net loss of $176k in 1HFY20. At the MR Project, MRD declared and interpreted mineral intersection at Targets T2 and T14 from the litho-geochemistry review of data derived from the previous drilling results.

On 7 December 2020, MRD acquired the WRWI project. So far, MRD has conducted project field work such as geological mapping, rock chip sampling, a detailed aeromagnetic and gravity survey covering the Madoonga and Wilgie Mia Formation BIFs at the project. It has reported Iron (Fe) assays from the rock chip samples (21 out of 24) taken at the BIF targets and desirably low silica (Si) and phosphorus (P) content. It held a cash balance of $528k as of 31 December 2020.

1HFY21 P&L Highlights (Source: Company Reports)

Key Risks: The company is exposed to the risk of conducting successful drilling programs, interpreting results from the exploration studies and data, raise funds and seek approvals for timely project studies and fieldwork.  

Outlook: In September 2020, MRD had announced plans to conduct a SQUID (Superconducting Quantum Interference Device) geophysical program to identify targets for nickel sulphide mineralisation at the MR project. Also, the data review from previous drilling results recommends further evaluation by drill testing. At its WRWI project, it has started the first drilling schedule for a period of ~three weeks and anticipates the initial results by May end.

Stock Recommendation: The stock of MRD gave a positive return of 128.57% in the past three months and a positive return of 166.67% in the past six months. The stock is currently trading towards its 52-weeks’ high level of $0.009. The stock of MRD has a support level of ~$0.007 and a resistance level of ~$0.009. On a TTM basis, the stock of MRD is trading at a price to book value multiple of 8.2x higher than the industry (Metals & Mining) median 2.7x, thus seems overvalued. Considering the current trading levels, significant returns from the past three months and six months, and valuation on a TTM basis, we believe that most of the company’s positives have been factored in at the current trading juncture. Hence, we suggest investors wait for better entry levels and give an ‘Expensive’ rating on the stock at the current market price of $0.008, down by 11.112% on 21 April 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

Note: Investment decision should be made depending on the investors’ appetite on 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.

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