Dacian Gold Limited

DCN Detail

Substantial Holder Update: Dacian Gold Limited (ASX: DCN) deals in gold exploration, mining and processing. The company is primarily focused on Mount Morgans Gold project near Laverton, Western Australia. As per a recent announcement, the company has updated that Perennial Value Management Limited has become a substantial shareholder with 5.14% voting power, representing 49,698,670 ordinary shares.

Q4FY21 Financial Performance:

• During the quarter, the company has repaid the debt of $5.2 million and total debt reduced to $16.2 million.
• DCN reported a reduction in total forward hedge position to 27,324oz at an average gold price of $2,238/oz.
• The company had total cash and gold on hand of $41.8 million as of 30 June 2021.
• The company completed a $40 million two-tranche placement and $3.7 million SPP that will be used to accelerate exploration, Redcliffe development.

Revenue Trend (Source: Analysis by Kalkine Group)

Outlook: The company has given guidance FY2022 production of 100,000-110,000oz at an AISC of $1,550- $1,700/oz. DCN has been significantly investing in long-term growth with allocation of $20.4 million in exploration and $66.5 million for Doublejay pre-stripping activities, Redcliffe project development, to name a few.

Key Risks:

• Liquidity Risk: To meet the financial obligation and operational activity, the company require sufficient liquidity to mitigate uncertainty.
• Market Risk: DCN is exposed to market price risk such as foreign exchange rates, interest rates, commodity prices and equity prices that could impact the company’s financial performance.

Valuation Methodology: Price/Earnings Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation: The company has completed 62,000m of exploration and resource definition drilling during Q4FY21. The stock of DCN is trading below its average 52-weeks' levels of $0.255-$0.565. The stock of DCN gave a negative return of ~9.01% in the past one year and a negative return of ~32.31% in the past three months. We have valued the stock using a P/E multiple-based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight premium to its peer average P/E (NTM trading multiple), considering expected economic recovery and reduction in debt. For this purpose, we have taken peers such as Westgold Resources Ltd (ASX: WGX), Regis Resources Ltd (ASX: RRL), Perseus Mining Ltd (ASX: PRU), to name a few. Considering the current trading levels and expected upside in valuation levels, decent cash position, increase in asset turnover ratio, allocation for long-term investment and the key risks associated with the business, we recommend a 'Speculative Buy' rating on the stock at the current market price of $0.270, as on 20 July 2021, 10:51 AM (GMT+10), Sydney, Eastern Australia.

DCN Daily Technical Chart, Data Source: REFINITIV

Buru Energy Limited 

BRU Details

Business Update: Buru Energy Limited (ASX: BRU) operates in production, development and exploration of oil and gas resources in Western Australia.

Recent Operations Update:

• The Seismic program will commence late July as crew is working on Perth Basin contract
• Ungani crude oil lifting was completed on 8 July, bringing estimated Buru’s 50% revenue share lifting to ~$3.2 million and price will be finalized at the end of July.
• Currajong 1 exploration program well was spudded on 1 July 2021.
• The cash position of the company post capital raised was ~$37 million with no debt.

Revenue Trend (Source: Analysis by Kalkine Group)

Outlook: The company is expecting Currajong 1 total depth of 2,300 metres and will be completed by late July to early August. Buru spuds Currajong 1 has a target resource of 28 million barrels.

Key Risks:

Manpower Risk: The company’s operation depends on skilled/experienced manpower and low availability of labour due to COVID-19 has impacted the operations in FY21.

Economic Risk: Any further decline in metal prices in international market that could impact earnings of the company in near-term future.

Stock Recommendation: As per a recent announcement, the company has received subscription application total of $1,019,000 from 133 shareholders at a price of $0.16 raised under the recent SPP. The stock of BRU is trading below its average 52-weeks' levels of $0.078-$0.225. The stock of BRU gave a positive return of ~53.40% in the past one year and a negative return of ~38.63% in the past three months. On a technical analysis front, the stock of BRU has a support level of ~$0.125 and a resistance level of ~$0.170. Considering the current trading levels, expected economic recovery, recent close of SPP and impressive cash position, we recommend a 'Hold' rating on the stock at the current market price of $0.130, as on 20 July 2021, 1:49 PM (GMT+10), Sydney, Eastern Australia.

BRU Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine do not hold interests in any of the securities or other financial products covered on the Kalkine website.