Sunrise Energy Metals Limited

SRL Details

Highlights of Q2FY22 (Ended 31 December 2021): Sunrise Energy Metals Limited (ASX: SRL) offers specialty materials and clean solutions to mining, oil & gas, power, etc. industries via its Clean-iX continuous ion exchange technology. It operates two key segments: metals division and water treatment solutions division.

Drilling Update:

• The drilling at the Sunrise East (holes SDD029 and SDD030) resulted in intersections with a cobalt laden zone near the surface and grades of nickel, platinum, and scandium in the oxide zone. SRL is undertaking diamond drill exploration at the SDD031 hole and advancing on the assay results and age dating studies on the SDD029 and SDD030 holes.
• At the Phoenix platinum prospect, SRL received all the multi element and fire assays from the Phase 2 diamond exploration. The results exhibited platinum mineralisation though the grades were reported to be lower than previous bonanza grades during Phase 1.

Financial Aid Post-the Quarter End:

SRL received up to $400 million of debt financing for its Sunrise project via a letter of conditional support obtained from Export Finance Australia (EFA), an Australian export credit agency.

• Financial Position: SRL exited the quarter with ~$29.3 million cash on hand as of 31 December 2021. It reported $3.68 million of net cash used in operating activities in Q2FY22.

Total Assets & Liabilities, Highlights; (Analysis by Kalkine Group)

Key Risks: SRL risks the discovery of exploration targets, climate changes, cost effective project funding, COVID-19 induced labour issues, and regulatory challenges. 

Outlook:

• The company is progressing on a range of workstreams on the Sunrise Battery materials Complex project to achieve multiple key deliverables to reduce the project start time.
• SRL has designed a 53-hole reverse circulation drill program to assess the extent of mineralisation (additional cobalt and nickel) at the Sunrise East project.
• At the Phoenix platinum prospect, SRL is researching to understand the timing and controls to platinum mineralisation. Growing exploration portfolio to extend the understanding of the geological potential of our broader tenement package,

Technical Commentary: SRL's prices are consolidating around a crucial upward sloping trend line support level, indicating the possibility of upside movement hereon. On the weekly chart, the leading indicator RSI (14-period) is hovering around the mid-point and currently trading at ~46.04 levels. However, the trend-following indicators 50-period SMA and 21-period SMA are placed above the CMP and may act as the resistance levels for the stock. Now the next important support level for the stock is at AUD 1.590, while resistance is at AUD 2.000 level.

Stock Recommendation: The stock of SRL gave a negative return of ~4.83% in the past three months and a negative return of ~16.90% in the past six months. The stock is currently trading below the 52-weeks’ average price level band of $1.315 - $3.300. Considering the current trading levels, low debt-to-equity levels, positive exploration update on the Sunrise project and progress on key milestones, the award of Commonwealth Government Major Project Status, technical analysis, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $1.770, down by 1.118% as of 2 February 2022.

SRL Weekly Technical Chart, Data Source: REFINITIV 

Note:  The purple color line in the chart depicts RSI (14-period), while the yellow color line represents the trend line. The sky-blue and red-color lines show 21-Period SMA and 50-Period SMA, respectively. The green-color histogram at the bottom of the charts represents volumes.  

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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