Stocks’ Details

Aeris Resources Limited

Growth in Resources: Aeris Resources Limited (ASX: AIS) is a diversified mining and exploration company that produces copper and gold. Recently, the company notified the market with an updated Mineral Resource for the Roses Pride deposit at the company’s 100% owned Cracow Gold Operations in Queensland. This reflects a rise of 260% increase in total contained gold ounces to 177,000 tonnes at 4.6 grams per tonne gold for 26.1 thousand ounces of gold as compared to the previously reported Mineral Resource (December 2019). During September quarter, the company reported gold production of 20,237 ounces @ AISC of A$1,282/oz while the copper production for the period stood at 6,044 tonnes @ AISC of A$3.33/lb. This production was with no lost-time injuries (LTI).  For the year ended 30^th June 2020, the company recorded a loss amounting to $38.351 million as compared to $12.673 million in FY19.

LTIFR and LTI (Source: Company Reports)

Guidance: With respect to Tritton copper operations, the company is expecting copper production in the range of 23.5kt to 24.5kt @ AISC between A$3.60/lb and A$3.75/lb for FY21. In addition, gold production at Cracow operation is expected of between 70koz to 75koz @ AISC between A$1,525/oz and A$1,575/oz.

Stock Recommendation: During Q1 FY21, the company decreased its net debt by $31.3 million, to $28.2 million. It closed the quarter with cash and receivables of $64.1 million. The stock of AIS has moved up by 179.06% and 285.67% in the last six and nine months, respectively. As a result, the stock is inclined towards its 52-week high level of $0.130. In addition, the stock is trading at a price to book value multiple of 3.1x as compared to the industry median (Metals & Mining) of 2.1x on TTM basis. Thus, it seems that the stock is overvalued at the current trading level. On a technical analysis front, the stock has a support level of ~$0.0696 and a resistance level of ~$0.1307. Therefore, considering the price movement in the past months, current trading level and valuation, we are of the view that most of the positive factors have been discounted at the current trading level and give an “Expensive” rating on the stock at the current market price of $0.115 per share, down by 4.167%on 11^th January 2021. We further suggest investors to wait for better entry level.

Peak Resources Limited

New Manager Director Commences Executive Duties: Peak Resources Limited (ASX: PEK) is engaged in the development and exploration of rare earth, gold, nickel, copper, etc. The market capitalisation of the company stood at $130.22 million as on 11^th Jan 2021. On 9^th December 2020, the incoming Managing Director, Bardin Davis, has commenced his executive duties, which was previously scheduled for 4^th January 2021. During the quarter ended 30^th September 2020, the NdPr price has increased to over US$50/kg and settled in a range of US$47-48/kg. The net cash outflow from operating activities stood at $892k. The company has paid $91,676 for directors’ fees and $17,068 payments to Steinepreis Paganin Lawyers & Consultant. For the year ended 30^th June 2020, the company recorded a loss amounting to $7,652,714 as compared to $4,596,053 in FY19.

NdPr Pricing (Source: Company Reports)

Capital Raising: After the end of September 2020 quarter, the company raised $3.5 million through the placement of shares to sophisticated, professional and other exempt investors. In addition, the company would raise a further $0.5 million via the Share Purchase Plan (SPP), which is currently underway. The company would use the funds raised from the Placement and SPP to maintain its financial position and assets and cover general operating expenses.

Outlook: Looking forward, the company is well-placed to become one of the world’s lowest cost, fully integrated NdPr producers. This would be supported by the benefits of vertically integrated assets.

Stock Recommendation: As on 30^th September 2020, the cash and cash equivalents of the company stood at $1.6 million. The stock of PEK has surged by 305% and 406.25% in the last six and nine months, respectively. As a result, the stock is inclined towards its 52-week high level of $0.089. On a technical analysis front, the stock has a support level of ~$0.054 and a resistance level of ~$0.089. Therefore, considering the price movement in the past months, and current trading level, we are of the view that most of the positive factors have been discounted at the current trading level and give an “Expensive” rating on the stock at the current market price of $0.077 per share, down by 8.334% on 11^th January 2021.

Strickland Metals Limited

A Look at September 2020 Quarter: Strickland Metals Limited (ASX: STK) is a gold exploration and mining company with a market capitalisation of ~$18.53 million as on 11^th January 2021. Recently, the company notified the market with an update on the progress of drilling activities at its Doolgunna Project, wherein, it stated that the second Diamond drill hole DGDD002 has now been completed to a depth of 555.3 metres. The company added that it has discovered copper mineralization in association with an extensive sulphide-rich system. During the quarter ended 30^th September 2020, the company successfully finished a share purchase plan of $1.4 million. In addition, the company has approved program of work for RC and Diamond drill testing of copper-zinc VMS target. The company recorded net cash outflow from operating and investing activities of $163k and $356k, respectively.  During FY20, the company recorded a loss amounting to $693,018 as compared to $1,835,675 in FY19.

Cash Flow (Source: Company Reports)

Outlook: Looking forward, the company would continue to focus on the continuous development of its significant gold projects.

Stock Recommendation: The company ended September 2020 quarter with a cash balance of $1,996,000. The stock of STK has moved up by 62.96% and 340%% in the last six and nine months, respectively.  The 52-week low-high range for the stock stands at $0.010 - $0.135, respectively. On a technical analysis front, the stock has a support level of ~$0.036 and a resistance level of ~$0.130. Thus, considering the low market capitalisation, and loss-making business, we advise the investors to avoid the stock at the current market price of $0.044 per share as on 11^th January 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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