Stocks’ Details

Alacer Gold Corp

Merger with SSR Mining Inc.: Alacer Gold Corp. (ASX: AQG) is engaged in the production and exploration of gold. As per the recent announcement, the company will be eliminated from the official list of ASX Limited at end of the trading session on 24^th September 2020. This action follows the completion of a merger between SSR Mining Inc. and Alacer Gold Corp. of equals transaction. The merger was announced on 11^th May 2020, to establish a free cash flow focused, diversified gold producer. However, the combined entity would continue its operation as SSR Mining Inc, and AQG will be a wholly owned subsidiary of SSR Mining.

Benefits for Shareholders: As a result of the transaction, the shares of AQG have been exchanged with 0.3246 SSR Mining shares for each Alacer share. This transaction is likely to provide advantages to both SSR and AQG shareholders, which mainly include an expanded portfolio of high quality, long-life operating assets in four territories. The transaction would also serve shareholders with attractive growth portfolio of low capital intensity opportunities.

Ended Q2 FY20 in Net Cash Position: During June 2020 quarter, AQG reported gold production of 167,212 ounces. The company reported YTD (14^th August 2020) attributable earnings amounting to $57 million and YTD normalized attributable earnings stood at $0.19 per share. AQG managed to close the quarter with net cash position of $34 million, which comprised of a cash and debt balance of $279 million and $245 million, respectively.

Key Metrics (Source: Company Reports)

Stock Details: Apart from above-stated benefits to the shareholder, the merger transaction will also provide improved trading liquidity in numerous global exchanges for generating capital markets presence as well as investor relevance. The stock of AQG has provided positive returns of 4.68% and 12.98% in the last one and three months, respectively. The stock has last traded at $9.400.

Chalice Gold Mines Limited

Completion of AEM Survey: Chalice Gold Mines Limited (ASX: CHN) is a mineral exploration company with a market capitalisation of $808.74 Mn as on 24^th September 2020. Recently, the company wrapped up an airborne electromagnetic (AEM) survey on its fully owned Julimar project. The survey recognised 3 large new EM anomalies, which are Hartog, Baudin and Jansz. Under the terms of the Employee Securities Incentive Plan, the company had issued 820,482 2020/2021 Performance Rights to its senior executives and employees, with no consideration.

Well-Financed with Decent Cash Position: With respect to Pyramid Hill Gold Project, the company finished 10-hole geological diamond drill program at the Karri, Ironbark North, and Ironbark South Prospect in June 2020 quarter. The company also completed a capital raising of A$30 million from institutional and sophisticated investors. The company seems to be well-financed for its systematic exploration programs in Western Australia and Victoria. This is being supported by a closing quarterly cash and investments balance of ~$54.3 million, which include ~$45.7 million of cash.

Cash Flows (Source: Company Reports)

Future Drilling Plan: The company has scheduled to conduct its next phase of diamond drilling at Pyramid Hill Gold Project in late Q3 FY20.

Stock Recommendation: The stock of CHN has moved up by 172.54% and 592.11% in the past three and six months, respectively. As a result, the stock is inclined towards its 52-week high level of $2.630. In addition, the stock of CHN is trading at a price to book value multiple of 28.6x as compared to the industry average (Metals & Mining) of 7.8x on TTM basis. Thus, stock seems overvalued at the current trading level. On a technical front, the stock of CHN has a support level of ~$1.973 and a resistance level of ~$2.581.  Hence, considering the price movement in the past months and current trading levels, we give an “Expensive” rating on the stock at the current market price of $2.460 per share, down by 6.464% on 24^th September 2020.

Jervois Mining Limited  

Receipt of Tax Refund from ATO: Jervois Mining Limited (ASX: JRV) is engaged into mineral exploration and evaluation. The market capitalisation of the company stood at $215.54 Mn as on 24^th September 2020. For the year ended 30^th June 2020, the company received a research and development tax refund amounting to A$1.537 from Australian Tax Office (ATO). The refund received are related to the expenditure done by the company within the Nico Young NI 43-101 Preliminary Economic Assessment. In another update, the company stated that it is likely to receive environmental approval from the National Environment Management Authority. This will allow the company to drill the CC copper-gold target in the Kilembe area of western Uganda and the company is likely to finish the initial 1,000 metres of core drilling.

June Quarter Update: During June 2020 quarter, the net cash used in the operating activities stood at $681k. The company exited the quarter with a cash balance of A$5.8 million, with nil debt. The company possesses a strong balance sheet and decent liquidity to finance its current operational footprint for over 12 months in spite of global upheaval caused by Covid-19.

Cash Flow from Operating Activities (Source: Company Reports)

Outlook: With respect to its Idaho Cobalt Operations, the company has scheduled to re-start the construction activities in Q2-Q3 2021 and is expecting to commence production in mid-2022. The company is likely to conduct its Annual Shareholders Meeting on 20^th October 2020.

Stock Recommendation: Current ratio of the company stood at 1.75x in 1H FY20, which is in line with the industry median. The stock of JRV gave a positive return of 3.08% in the last one month. The 52-week low-high range for the stock stands at $0.115-$0.375, respectively. In addition, the stock is trading at a price to book value multiple of 1.7x as compared to the industry median (Metals & Mining) of 2.5x on TTM basis. On the technical analysis front, the stock of JRV has a support level of ~$0.278 and a resistance level of ~$0.353. Therefore, considering the decent liquidity position, healthy balance sheet and key risk, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.295 per share, down by 11.94% on 24^th September 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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