AVZ Minerals Limited

AVZ Details

Strategic Equity Placement: AVZ Minerals Limited (ASX: AVZ) is engaged in the exploration of minerals and, the market capitalisation of the company stood at A$99.08 Mn as on 30^th December 2019. Recently, the Managing Director of the company addressed the shareholders and stated that the release of its initial 2Mtpa Scoping Study had been another significant milestone in 2019. Also, the Company has announced a strategic equity placement amounting to A$14.1 million to Yibin Tianyi Lithium Industry Co. Ltd via the issue of 314,300,000 shares at 4.5 cps. It was mentioned in the release dated 31^st October 2019 that the stage 1 metallurgical test work results have been extremely favourable and it has  immediately moved into Stage 2 test work, while at the same time, the company is progressing at full speed to complete its DFS by early 2020.


Net Cash Used in Operating Activities (Source: Company Reports)

What to Expect:AVZ continues with its fast-track production strategy. The Company also remains on target to wrap up its Definitive Feasibility Study in Q1 of the financial year 2020, with construction expected to commence in Q4 FY20 and plant commissioning is expected by Q4 2021.

Stock Recommendation: The stock generated negative returns of 1.15% and 8.51% over the period of one month and three months, respectively. The company has received excellent feedback in its recent round of government engagement. Current ratio of the company stood at 3.70x in FY19 as compared to the industry median of 1.82x. This reflects that the company is in a decent position to address its short-term obligations as compared to the broader industry. Therefore, considering the announcement of strategic equity placement, decent liquidity position and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of A$0.044, up 2.326% on 30^th December 2019.


AVZ Daily Technical Chart (Source: Thomson Reuters)
 

Azure Minerals Limited

AZS Details

Amount Received form Mexican Tax Office: Azure Minerals Limited (ASX: AZS) is involved in the exploration of base as well as precious metals. The market capitalisation of the Company stood at A$21.9 Mn as on 30^th December 2019. Recently, three Directors of the company, namely, Peter Ingram, Anthony Rovira, and Wolf Martinick, acquired 500,000, 1,000,000 and 500,000 options, respectively. Also, AZS received an amount of Mx$6,188,000 from the Mexican tax office, which is the result of the successful resolution of the legal action of the company for the recovery of IVA. The following picture provides an idea of net cash used in operating activities during the quarter ended 30^th September 2019:


Net Cash Used in Operating Activities (Source: Company Reports)

Future Aspect: Future performance of the company is dependent upon the success of exploration, the progress of development of those projects where precious and base metals are already present, as well as continued funding.
Stock Recommendation: As per the quarterly performance report for the period ended September 2019, the Company has secured 100% Ownership of the 32Moz Silver Project. With respect to the Oposura project, the company plans a second phase of open-pit mining, which is to be undertaken after a successful processing operation producing saleable concentrates. Debt to equity multiple of the company stood at nil as compared to the industry median of 0.13x. Thus, in light of regaining 100% ownership of 32Moz Silver Project, deleveraged balance sheet and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of A$0.130, down 3.704% as on 30^th December 2019.

 
AZS Daily Technical Chart (Source: Thomson Reuters)
 
 

Berkeley Energia Limited

BKY Details

A Rise in Uranium Prices: Berkeley Energia Limited (ASX: BKY) is the explorer and developer of uranium. The market capitalisation of the company stood at A$56.89 Mn as on 30^th December 2019. The company has recently issued 130,000 ordinary shares to a key consultant on 6^th December 2019. With respect to Uranium market, during the quarter ended September 2019, the uranium price witnessed a rise of 5%. BKY has 2.75 million pounds of U₃O₈ under contract for the first six years, with a further 1.25 million pounds of optional volume, at an average price above US$42.


Net Cash Used in Operating Activities (Source: Company Reports)

Future Prospects: Berkeley Energia Limited would continue to build its offtake book progressively. Also, the company has granted the Oman sovereign wealth fund the right to match any future long-term offtake transactions.

Stock Recommendation: As per the FY19 Annual Report, the Company has made an investment of over €80 million for developing the Salamanca mine in the past decade. The Company is also planning to make an additional investment of €250 million over the life of the project. The stock gained 57.14% during the span of one year and 37.50% on a YTD basis. The stock is currently trading at a price to book value multiple of 0.5x as compared to the industry median (Uranium) of 0.8x on a TTM basis. Therefore, considering the strong financial position of the company with cash of A$98.2 million, valuation and decent returns in the past, we give a “Speculative Buy” recommendation on the stock at the current market price of A$0.220 per share on 30^th December 2019.

 
BKY Daily Technical Chart (Source: Thomson Reuters)
 

GR Engineering Services Limited

GNG Details

Operational Performance of FY19: GR Engineering Services Limited (ASX: GNG) is involved in the provisioning of process engineering. The company also provides design and construction services to the mining and minerals processing industries. GNG recently announced that Mitsubishi UFJ Financial Group, Inc. made a change to its substantial holding in the company on 5^th November 2019, and the current voting power stands at 11.32% as compared to the previous voting power of 13.41%. When it comes to the operational performance for the financial year 2019, the company has wrapped up 39 studies. With respect to oil & gas, the longer-term operations, as well as maintenance services revenue are delivering baseline revenue along with project-based work. The following picture provides an overview of the earnings of the company:


Earnings (Source: Company Reports)

Guidance:For FY20, the company expects revenue in the ambit of $200 million to $220 million. The company is placed well in order to meet future bonding requirements under all growth assumptions.

Valuation Methodology:EV to Sales Multiple Approach

EV/Sales Based Valuation (Source: Thomson Reuters)
 
Stock Recommendation: The company experienced positive contributions from Upstream Production Solutions and maintenance service delivery, and the FY19 TRIFR (Total Recordable Injury frequency rate) of the company stood at 4.99 in FY19. The company possesses a strong balance sheet with cash of $31.4 million and interest-bearing debt amounting to $0.5 million. We have valued the stock using EV to sales multiple based relative valuation method and arrived at a target price of double-digit upside (in percentage terms). Therefore, considering the Company’s significant bonding headroom in the form of $130 million total project bonding facilities, Bank guarantee facility amounting to $70 million and Insurance bond facility of $60 million and a decent balance sheet, we give a “Speculative Buy” recommendation on the stock at the current market price of A$0.780 per share on 30^th December 2019.


GNG Daily Technical Chart (Source: Thomson Reuters)
 

Galan Lithium Limited

GLN Details

Issuance of Share Option:Galan Lithium Limited (ASX: GLN) is engaged in the exploration of lithium and other metals. On 30^th December 2019, the company reported the issuance of 1,000,000 fully paid ordinary shares in the capital of the company on the conversion of $0.14 options expiring on or before 31^st December 2019.

Q1FY20 Cash Flow Highlights for the Period ended 30 September 2019: GLN announced its first-quarter cash flow results, wherein, the company reported net cash used in operating activities at $2.29 million which includes $1.939 million used for exploration and evaluation followed by $0.361 million for administration and corporate costs. The business reported net cash from financing activities at $$1.934 million as on 30^th September 2019. GLN reported cash and cash equivalent during the end of Q1FY20 at $2.473 million.

Q2FY20 Cash Flow Guidance: As per the second quarter cash flow guidance, the company reported total estimated cash outflows of $1.8 million, which includes $1.5 million spent on exploration and evaluation and $0.3 million of administration and corporate costs.


Q2FY20 Cash Flow Guidance (Source: Company Reports)

Stock Recommendation: The stock of GLN is quoting at $0.145, with a market capitalization of $20.9 million. The stock is quoting at the lower band of its 52-week trading range of $0.125 and $0.680 million. The stock has corrected 36.14% and 30.26% in the last three months and six months, respectively. During the September quarter, the company reported exceptional maiden drill results from the Western Tenements indicating the potential for further additional resources. Considering the current trading levels, recent price movements and drilling results, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.145, up 9.848% on account of ordinary share issuance as on 30 December 2019.

 
GLN Daily Technical Chart (Source: Thomson Reuters)
 

New Energy Minerals Ltd

NXE Details

Divestment from Montepuez Ruby Project to Aid Business Prospect:  New Energy Minerals Ltd (ASX: NXE) is engaged in the exploration and development of Graphite. On 30^th December 2019, the company announced the extension of the Drop-Dead Date with respect to closing of the ruby asset sale transaction with Fura, from 31^st December 2019 to 31^st January 2020.

Q1FY20 Cash Flow Highlights for the Period ended 30 September 2019:NXE announced its quarterly cash flow statement, wherein, the business reported net cash used in operating activities at $1.011 million which includes $0.684 million used for exploration and evaluation, $0.068 million used for staff cost and $0.257 million for administration and corporate costs. NXE reported net cash from financing activities at $0.595 million during the first quarter of FY20. The business reported a cash balance of $0.533 million at the end of Q1FY20.

Q2FY20 Cash Flow Guidance:As per the guidance for Q2FY20, the company estimates cash outflows of $0.440 million, including $0.072 million of exploration and evaluation expense and administration and corporate costs of $0.368 million.


Q2FY20 Expected Cash Flow (Source: Company Reports)

Stock Recommendation:The stock is quoting at $0.013 with a market capitalisation of ~$2.17 million. The stock is trading at the lower band of its 52-week trading range of $0.013 and $0.056. The stock has corrected 35% and 13.33% in the last three-months and six-months, respectively. During Q1FY20, the company progressed on several fronts, such as finalizing the divestment of the remaining 50% of Balama Resources, which holds the Caula project, and the divestment of the Montepuez Ruby Project, to Fura Gems. On the valuation front, the stock is available at a price to book value of 0.2x on trailing twelve months (TTM) basis as compared to the industry median of 1.5x (Basic Materials). Considering the above factors, price movement, current trading levels, valuation and business prospects, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.013 as on 30 December 2019.


NXE Daily Technical Chart (Source: Thomson Reuters) 
 
 

Danakali Limited

DNK Details

Documentation of US$200 million Senior Debt Facility Executed: Danakali Limited (ASX: DNK) is a potash company focused on the development of the Colluli Potash Project. Recently, Colluli Mining Share Company (CMSC), subsidiary of DNK, announced the execution of the documentation for the US$200 million senior debt facility with AFC and Afreximbank.

Q3FY19 Cash Flow Highlights for the Period ended 30^th September 2019: DNK reported its quarterly cash flow statement, wherein, the company reported net cash used in operating activities at $0.674 million, which includes administration and corporate costs at $0.436 million and $0.254 million for staff costs. The company reported $1.21 million used in investing activities and $0.502 million generated from financing activities.

Q4FY19 Cash flow Guidance:As per cash flow guidance for the quarter, the company expects a total estimated cash flow of $1.778 million, including $1.394 million for funding of Joint Venture, administration and corporate costs of $0.209 million and $0.175million for staff costs.


Q4FY19 Expected Cash Flow (Source: Company Reports)

Stock Recommendation: The stock is quoting at $0.60 with a market capitalization of ~$189.54 million. The stock has corrected 7.03% and 14.39% in the last three months and six-months, respectively. At the current market price, the stock is trading at the lower band of its 52-week trading range of $0.575 and $0.820. The company reported execution of the documentation for the US$200 million senior debt facility, which is likely to be utilized for the development and construction of the Colluli Potash Project. Considering the current trading levels, stock price movement and documentation of senior debt facilities, we recommend a ‘Speculative Buy’ on the stock at the current market price of $0.60, up 0.84% as on 30 December 2019.


DNK Daily Technical Chart (Source: Thomson Reuters)

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