Stocks’ Details

Salt Lake Potash Limited

Resolution of Debt Financing & Capital Raising: Salt Lake Potash Limited (ASX: SO4) is engaged in the exploration and development of resource projects. The market capitalisation of the company as on 21 December 2020, stood at ~$266.62 million. As per a recent update, the trading halt, which was imposed on SO4, was lifted on an immediate basis, following the company's announcement regarding the resolution of debt financing and capital raising.

Q1FY21 Quarterly Update: The company has been focussed on developing the Lake Way Project and the construction is said to be on schedule. The project has received a financial package of $203 million Syndicated Facility Agreement (SFA) and a $98.5 million fully underwritten placement and accelerated non-renounceable entitlement offer (ANREO) at $0.50/share. SO4 had a net outflow of $0.44 million from operating activities, for the given quarter under consideration.

Cash Flow from Operating Activities (Source: Company Reports)

Outlook: The company continued to focus on developing the Lake Way SOP Project in Wiluna, Western Australia. Also, the funding package which the company received, will help it to deliver the project on schedule. It expects to start the production of Sulphate of Potash (SOP) in the March quarter of 2021.

Stock Recommendation: The company has continued paleochannel exploration drilling at Lake Way and expects to see potential upside in its BFS brine production model. Debt to equity of the company stood at 1.17x in FY20, higher than the industry median of 0.39x. The stock of SO4 gave a negative return of 24.50% in the past three months but went up 21.9% in the past nine months. As per ASX, the stock of SO4 is trading below its average 52 weeks’ trading range of $0.287-$0.784. On a TTM basis, the stock of SO4 is trading at a P/BV multiple of 3.7x, higher than the industry average (Basic Materials) of 2.7x. On a technical front, the stock of SO4 has a support level of $0.366 and a resistance level of $0.54. Considering high debt to equity ratio, valuation on TTM basis, losses in FY20, volatility in price movement and key risks associated with the business, we suggest investors to wait for better entry level and give an ‘Expensive’ rating on the stock at the current market price of $0.385, up by 2.666% as on December 21, 2020.

Paterson Resources Limited

Funding Grant: Paterson Resources Limited (ASX: PSL) is engaged in mineral exploration, focused on gold and copper projects. The market capitalisation of the company as on 21 December 2020, stood at ~$10.51 million. The company has been awarded $200k co-funding EIS grant from the WA government. The funds will be used to drill a 900-metre-deep diamond hole, targeting a magnetic anomaly source located below the gold mineralised Grace/Bemm Shear zone.

Q1FY2021 Update: During September, the company completed a placement to raise ~$500,000 from professional investors, with one free attaching option for every one placement share subscribed for. In addition, anomalies were identified on the high-resolution aeromagnetic data in the Grace Project. Cash outflow from operations during the quarter stood at $384,000.

Cash Flow from Operating Activities (Source: Company Reports)

Outlook: PSL is an active explorer and aims to discover valuable mineral resources. It has been granted exploration licenses and prospecting licenses in the Grace Gold Project, located in Paterson mineral province in Western Australia.

Stock Recommendation: PSL has satisfied all the conditions for re-admission of its securities to quotation on ASX, during the September 2020 quarter. The stock of PSL gave a negative return of 33.33% in the past three months and a negative return of 41.66% in the past one month. As per ASX, the stock of PSL is trading below its average 52 weeks’ trading range of $0.030-$0.060. Recently, the company completed the consolidation of its securities with a record date of 17 December 2020. The securities were consolidated on the basis that every 15 shares of the company were consolidated in to 1 and hence ~4,505,533,061 securities were converted to ~300,368,871.

On a technical front, the stock of PSL has a support level of $0.031 and a resistance level of $0.06. Considering, the company’s tepid FY20 results, track record of incurring net losses, cash outflow from operating activities in 1QFY21, and COVID-19 led uncertainties, we suggest investors to avoid the stock at the closing price of $0.035, up by 2.941% as on December 21, 2020.

Corazon Mining Limited

Acquisition of New Ground: Corazon Mining Limited (ASX: CZN) is engaged in the exploration for nickel, cobalt, copper, copper, gold, and development of mining activities. The market capitalisation of the company as on 21 December 2020, stood at ~$6.50 million. It has recently announced the acquisition of new ground at the Lynn Lake project in Manitoba Province, Canada.

Q1FY2021 Update: During the quarter, the company confirmed porphyry potential at the Mt. Gilmore project in NSW, Australia. It also defined new nickel-copper sulphide targets at Lynn Lake. CZN completed a capital raising of $1.69 million during the period, which is to be used to fund ongoing exploration at Lynn Lake and for working capital requirements. During the quarter, there was a net cash outflow of $184,000.

Q1FY2021 Cash Flow from Operations (Source: Company Reports)

Outlook: CZN has been making advancements in the entire Lynn Lake Nickel Copper Cobalt Mining Centre in Canada, and the Mt Gilmore Cobalt Copper Gold Sulphide Project in N.S.W. The projects are regarded as strategic assets and have the potential to supply strategic metals to the rechargeable battery industry.

Stock Recommendation: The company has recently discovered new and large sulphide systems at both of its projects. The stock of CZN gave nil returns in the past three months and a negative return of 33.33% in the past one month. On a technical front, the stock of CZN has a support level of $0.001 and a resistance level of $0.004. Considering the key investment risks associated with business, the company’s limited operating history, track record of incurring net losses, and uncertainty surrounding the impact of COVID-19 pandemic, we suggest investors to avoid the stock at the closing price of $0.002 as on December 21, 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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