Base Resources Limited

BSE Details

Outcome for PFS of Kwale North Dune Project: Base Resources Limited (ASX: BSE) is engaged in producing mineral sands based in Australia. The company mainly operates 100%-owned Kwale Mineral Sands Operation (Kwale Operation) in Kenya. The company's segments include Kwale operation and other operations. Recently, the company has announced regarding non-viability of its Kwale North project after a Pre-Feasibility study (PFS). The company is expecting lower heavy mineral grade, higher land acquisition cost, elevated slimes content and associated tailing disposal costs to mine the deposits at Kwale North Dune project. 

1HFY21 Financial Highlights: BSE has reported a decline in its sales revenue to US$72.76mn in 1HFY21 as compared with US$83.46mn in 1HFY20, on the back of lower ore mining and subsequently lower production of heavy mineral concentrate (HMC). The company has registered a loss of US$6.33mn in 1HFY21. The company has posted a decline in its cost of goods sold to US$28.99mn in 1HFY21 as compared with US$32,091mn in 1HFY20. The company has registered a decline in Cash and Cash equivalents to US$99.60mn as on 31 December 2020 as compared with US$162.55mn as on 30 June 2020.

Revenue Growth (Source: Company Reports) 

Key Risks: The company is engaged in mining activities. It requires regulatory approvals to carry out its business, any delay in regulatory approvals may impact the business of the company and may lead to financial losses for the company. The company is exposed to adverse climate risk. Heavy Rain, Flooding, Earthquake, etc. may have a severe impact on the projects and may lead to financial losses. 

Outlook: As per the company report, the company is currently assessing the potential feasibility of the North Dune and Bumamani deposits for mining higher-grade minerals. The company will remain focused on lower capital investment and will progress towards assessing an outcome for the higher-grade mineral option by mid-2021.

Stock Recommendation: In the last one month, BSE has decreased by ~9.83% and by ~3.50% in the last three months. The current market capitalisation of BSE stands at ~$318.06mn as of 12 April 2021. The stock is currently trading above the average 52-week price level range of ~$0.120 -~$0.335. On the technical analysis front, the stock has a support level of ~$0.269 and a resistance of ~$0.291. On a TTM basis, the stock of BSE is trading at a Price/Book Value multiple of 0.7x, lower than the industry median (Metals & Mining) of 2.8x. Considering the company the sound demand for product, decline in its cost of goods sold, positive outlook, valuation on TTM basis, and current trading levels, we recommend a “Hold” rating on the stock at the current market price of $0.275, up by 1.851% as on 12 April 2021.

BSE Daily Technical Chart (Source: Refinitiv, Thomson Reuters) 

Jindalee Resources Limited

JRL Details

Highest Lithium Deposits Confirmed: Jindalee Resources Limited (ASX: JRL) is engaged in mineral exploration activities. The company owns interests in tenements in Tasmania for magnesite and in Western Australia for gold, diamonds, base metals, and iron ore. The company's projects include Aries Project, Arthur River Project and Joyners project. The company has recently upgraded its inventory of inferred mineral resource to 1.43bn tonnes at 1,320ppm Li for total of 10.1mn tonnes Lithium Carbonate Equivalent (LCE) at 1000 ppm cut-off grade. The company has also announced regarding its 100% owned project, McDermitt Lithium Project being the largest lithium deposit in the US which contains 10.1mt (LCE). JRL has enough liquidity to fund the development at McDermitt Project with drilling activities and mining and metallurgical studies.

1HFY21 Financial Highlights: JRL has registered a decline in its revenue from $1,606 in 1HFY21 as compared with $3,960 in 1HFY20. The company has registered a significant rise in its other income to $42,507 in 1HFY21 from $6,995 in 1HFY20. The company has registered a loss of $0.44mn in 1HFY21. The company has posted an improvement in its cash position to $1.40mn as on 31 December 2020 from $0.83mn as on 30 June 2020.

Liquidity Position (Source: Company Reports) 

Key Risks: The company is engaged in exploration activities, so any adverse change in climate may lead to business closure and financial losses for the company. The company is exposed to the risk of fluctuation in the commodity prices, which may result in financial losses for the company. 

Outlook: As per the company report, JRL has gained additional tenements in the Widgiemooltha area in Western Australia. The company is expecting to start drilling activities to test gold targets at Mandilla and Chalice in mid-2021.

Stock Recommendation: In the last one month, JRL has increased by ~84.21% and by ~211.11% in the last three months. The current market capitalisation of JRL stands at ~$176.48mn as of 12 April 2021. The stock is currently trading above the average 52-week price level range of ~$0.255-~$3.440. On the technical analysis front, the stock has a support level of ~$2.749 and a resistance of ~$3.424. On a TTM basis, the stock of JRL is trading at a Price/Book Value multiple of 32.8x, higher than the industry median (Metals & Mining) of 2.8x. Considering, the steep price movement in the past months, decline in its revenues in 1HFY21, associated risks with the business, higher valuation on TTM basis, and current trading levels, we are of the view that most of the positive factors of the company have been discounted at current trading levels. Hence, we suggest investors to wait for better entry level and give an “Expensive” rating for the stock at the closing price of $2.80, down by 18.605% on 12 April 2021.

JRL Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Note: 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.

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