Morella Corporation Limited

1MC Details

Recent Business Update: Morella Corporation Limited (ASX: 1MC) is engaged in the production and exploration of lithium.

• 17 December 2021: The company changed its name to Morella Corporation Limited (1MC) from Altura Mining Limited (AJM).
• 15 December 2021: 1MC presented an update on Fish Lake Valley Lithium Project. The exploration project will provide substantial opportunities in the North American region. 1MC confirmed lithium mineralization of successful lithium exploration, operations, and development.
• 2 December 2021: 1MC’s non-renounced entitlement offer was substantially oversubscribed with receipt of valid acceptances of 638.70 million new shares, worth $3.19 million. Subsequently on 8 December 2021, the company considered to scale back the issue due to the over-subscription.

Q1FY22 Activity Update

• Due Diligence Completion: During the period, 1MC completed due diligence investigations, consequent to which 1MC began earn-ins for the Fish Lake Valley projects and Sayona tenement portfolio. The earn-ins have delivered access to lithium projects in Tier 1 jurisdictions of mining.
• Recapitalization and Re-quotation Process: Consequent to the quarter, recapitalization commitments were completed and shall be announced to the market in the December quarterly report.
• Cash Position: As of 30 September 2021, the cash balance stood at $485,000, with the net cash position being increased by $97,000 QoQ. Receipts primarily came from pre-payments and the sale of Lithium Corporation shares.

FY21 Financial Snapshot, Analysis by Kalkine Group

Key Risks and Challenges

Revenue inflow stands negligible due to the exploration process underway with minimal commercialization of extracted products. The company has manifested a trend of negative shareholder’s returns. The top line remains unstable, subject to exploration developments.

Outlook

With earn-ins in effect, 1MC plans site-related activities to commence in H1FY22. Prices of all lithium commodities/chemicals have trended upwards throughout the quarter. Increased costs and a tight lithium supply shall deliver a sweet spot for 1MC to introduce its explored lithium to the US market.

Technical Note: On the technical analysis front, on the daily chart, the default values have been used for Relative Strength Index. The 14-day RSI measures at 34.24, which indicates that the stock of the company currently trades in the oversold region and therefore, it might reverse its trend to upside in the coming times. The support levels for the stock is placed at ~$0.014 while the key resistance is at ~$0.027.

Stock Recommendation

The stock of 1MC gave a negative return of ~68.335% in the past year. The stock is currently trading higher than the 52-weeks’ average price level band of $0.010 - $0.021. Considering the current trading levels, over-subscription of the entitlement offer, potential resurgence of cash balance via security issue, recent rally assumed in lithium stocks, and risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.019, as of 04 January 2022, at 10:30 PM (GMT+10), Sydney, Eastern Australia.

Investors with high-risk appetite should evaluate this stock in view of the technical support and resistance levels as well as taking into consideration associated risks of exploration activities, liquidity constraints, high market competition and COVID-19 constraints.

1MC Daily Technical Chart, Data Source: REFINITIV

Note: The purple line reflects the RSI (14-day period)

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

Note 2: 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.

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 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.

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