Hot Chili Limited

HCH Details

Hot Chili Limited (ASX: HCH) is a mineral exploration company focused on developing the Costa Fuego copper hub in the coastal range of Chile.

Operational Spotlight:

• HCH upgraded its mineral resources estimate at Costa Fuego copper hub with indicated resources of 725MT having the grade of 0.47% CuEq for 2.8MT Cu, 2.6Moz Au, 10.5Moz Ag, and 67kt Mo.
• With the updated resource estimates, HCH now has high-grade indicated resources representing one-third of contained copper and gold. This reflects an increase of 53%.
• During the quarter ending March 31, 2022, HCH appointed Dr Nicole Adshead-Bell as the new Chairman.
• Drilling results at its Cortadera mine returned a significant intersection of 552m grading 0.6% CuEq, 0.2g/t Au, 89ppm Mo from 276m depth down-hole.
• Effective from April 7, 2022, HCH debuted in the U.S. OTCQX Best Market under the ticker OTCQX: HHLKF. The company will continue to trade on ASX and TSX Venture Exchange under the ticker ‘HCH’.
• Due to nil cash receipts from customers, HCH posted negative operating cash flows of $9.29 million. It had closed the quarter with a cash balance of $28.28 million as of March 31, 2022.

Updated Mineral Resources Summary (Analysis by Kalkine Group)

Key Risks: HCH has nil revenue-generating assets, and any delay in project scoping and drilling studies may drain existing liquidity.

Outlook: Post updated resources estimates, Costa Fuego is positioned as a top-ten copper development project, as claimed by the company. Over 80% of its resources are now become indicated, the company is confident that the pre-feasibility study to deliver large ore reserves.

Stock Recommendation: The stock of HCH has been corrected by ~15.19% in the past three months. The stock just recovered from its 52-week low price of $1.250. On a TTM basis, the stock has been valued at a Price-to-Book Value multiple of 0.8x as compared to the industry median of 2.2x (Metals & Mining). This signals the stock of HCH is undervalued at current trading levels. Considering the upgraded resources estimates at its Costa Fuego copper hub, positive drilling results at its Cortadera mine, undervaluation as per the TTM valuation, the commencement of trading on the U.S. OTC platform, decent cash balance, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the closing market price of $1.340, down by ~2.54% as of May 05, 2022.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

HCH Daily Technical Chart, Data Source: REFINITIV 

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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