Mithril Resources Limited

Exploration Results at La Soledad Target: Mithril Resources Limited (ASX: MTH) is engaged in exploring the mineral deposits. It has an option agreement to acquire the Copalquin mining concessions in Mexico via its subsidiary Drummond Gold S.A. de C.V. As of 24 March 2021, the market capitalisation of the company stood at ~$47 million. MTH recently provided an update wherein it highlighted high-grade gold and silver intercepts from the CDH-054 drill hole at the La Soledad target, extending the mineralisation to the down and west dip. MTH has resumed drilling at the El Refugio target at CDH-050 hole (bonanza grade) and is planning to drill deeper and along strike to the west.

A Look at the Half-Yearly Results Ending December 2020: MTH generated a revenue of $53k from other income sources and incurred a net loss after tax of $1.19 million for 1HFY21. During 1HFY21, MTH completed 7,188 metres of the maiden diamond core drilling program on time and within budget at the Cometa Project. It undertook to drill at the La Soledad, El Refugio, and El Cometa, targets at the project. The results exhibited interception with multiple gold and silver veins at the holes drilled La Soledad and Los Reyes targets. The historical results of drilled holes at the El Cometa target also affirmed a shallow vein system and extended to further targets. MTH had net cash outgoing of $896k in 1HFY21. MTH held a cash balance of $1.03 million as of 31 December 2020. Post-1HFY21 results’ release, MTH reported a raise of $5 million (before placement costs) via the issue of 263.15 million fully paid ordinary shares at $0.019 for a drill program at the Copalquin project in FY21.

1HFY21 P&L Highlights (Source: Company Reports)

Key Risks: The firm faces the risk of the ongoing pandemic and operates as per the Government- mandated protocols in Mexico. It runs the risk of discovering mineralisation targets at the projects and adequate funding for the exploration activities. 

Outlook: The company will continue drilling at its bonanza-grade hole at target El Refugio, Cometa project.

Stock Recommendation: The stock of MTH gave a positive return of 9.52% in the past three months and a positive return of 58.69% in the past six months. The stock is currently trading lower than the average 52-weeks’ price level of $0.004-$0.056. The stock of MTH has a support level of ~$0.013 and a resistance level of ~$0.028.  On a TTM basis, the stock is trading at a price to book value multiple of ~2.8x higher than the industry (Metals & Mining) median of ~2.7x. Considering the absence of revenue from core operations during FY18-FY20, track record of incurring net losses, negative ROE, and valuation on a TTM basis, we give an ‘Avoid’ rating on the stock at the current market price of $0.019, down by 5.001% on 24 March 2021.

Galileo Mining Limited

Drilling Update on Fraser Range: Galileo Mining Limited (ASX: GAL) is engaged in exploring minerals (copper, nickel, and cobalt) in Western Australia (WA). As of 24 March 2021, the market capitalisation of the company stood at ~$32.91 million. GAL has announced the completion of one diamond drill hole at its Lantern South (LS) prospect in the Fraser Range region, Western Australia (WA). The drilling intersected two sulphide zones (mostly iron sulphide, minor nickel & copper sulphide) in the drill hole (LADD003). GAL will undertake downhole EM (DHEM) surveying at the Lantern prospects to discover off-hole conductive targets for potential massive sulphides. GAL undertook an infill EM surveying of the data at the Delta Blues prospect, resulting in updated models for two targets at DB1 and DB2.

A Sneak-Peak at the 1HFY21 Results: During 1HFY21, GAL reported other income of $92k and a net loss after tax of $220k. During the reporting period, GAL undertook reverse circulation (RC) drilling campaigns at its LS prospect with assay results confirming the nickel-sulphide deposits. GAL also completed a diamond drilling campaign in September to identify deeper prospective nickel targets. At the Norseman project (100%), GAL is advancing well with its soil sampling program. It is interpreting and evaluating results with raw data sets of samples (1,726). As of 31 December 2020, GAL had cash on hand amounting to $6.92 million.

1HFY21 P&L Highlights (Source: Company Reports)

Key Risks: GAL runs the risk of non-discovery of nickel-cobalt-copper targets from its drilling programs, delays in Government approvals for exploration activities.

Outlook: GAL will conduct electromagnetic (EM) surveys at the Lantern prospects to discover more EM conductive zones. It plans to undertake surveys to find more nickel sulphide zones of mineralisation. In FY21, GAL aims to drill test the nickel targets identified so far from its exploration activities. At Norseman, GAL expects to generate nickel targeting areas by integrating existing soil sampling data sets with the new hyperspectral and geophysical data.

Stock Recommendation: The stock of GAL gave a positive return of 7.14% in the past three months and a positive return of 15.38% in the past nine months. The stock is currently trading lower than the average 52-weeks’ price level of $0.10-$0.45. The stock of GAL has a support level of ~$0.213 and a resistance level of ~$0.244. Considering the absence of revenue from the core projects, track record of incurring net losses, negative ROE, we give an ‘Avoid’ rating on the stock at the current market price of $0.225, down by 2.174% on 24 March 2021.

Southern Gold Limited

A Look at the 1HFY21 Results: Southern Gold Limited (ASX: SAU) is a developer and explorer of wholly-owned properties/projects in South Korea. SAU has a JV (50: 50) with Bluebird Merchant Ventures (BMV) in Gubong and Kochang projects in South Korea. As of 24 March 2021, the market capitalisation of the company stood at ~$18.13 million. SAU received an income of $119k, and a net loss after tax of the Group was $1 million for 1HFY21. During 1HFY21, SAU received peak gold and silver assay results from the diamond drilling undertaken at three holes at Aphae Pit and conducted a magnetic survey. At the Weolyu Project, the drilling results exhibited a downgrade at the Weolyu South prospect. At the Dokcheon project, the drilling results from the mineralised Cheongyong Vein did not yield desired results. SAU will conduct further reconnaissance sampling to the north-west of the vein to validate the potential existence of gold-silver mineralisation basis the initial field reviews of the historical workings.

In September 2020, SAU announced a placement of 85 million shares at $0.12 per share for a capital raising of $10.2 million. The issue was oversubscribed and saw massive demand from Asia. SAU held a cash balance of $10.15 million as of 31 December 2020 and had cash outgoings of $941k during 1HFY21.

1HFY21 Result Highlights (Source: Company Reports)

Key Risks: The company runs the risk of identifying drilling targets, discovering desired mineralisation, and interpreting results correctly to complete the drilling program. It also faces the risk of seeking funding for the projects. 

Outlook: At Aphae Pit, SAU will complete the Phase 2 drilling to test the structure where gold mineralization is expected. At the Weolyu project, the company has identified prospective areas to the north-east of ‘Weolyu South’ for further reconnaissance traverses and soil sampling programs. In January 2021, BMV proposed SAU decide alternative means regarding their ongoing settlement to purchase and sell their JV projects. While the companies keep the talks open for negotiations, the SAU Board estimates recovery of over $1.93 million from the settlement.

Stock Recommendation: The stock of SAU gave a negative return of 21.81% in the past three months and a negative return of 33.84% in the past six months. The stock is currently trading towards its 52-weeks’ low level of $0.078. The stock of SAU has a support level of ~$0.079 and a resistance level of ~$0.102. On a TTM basis, the stock is trading at a price to book value multiple of ~0.9x, lower than the industry (Metal & Mining) median of ~2.7x, thus seems undervalued. Considering the low trading levels, low debt levels, decline in H1FY21 net loss, decent cash position and high current ratio in 1HFY21, and valuation on a TTM basis, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.086, up by 1.176% on 24 March 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine do not hold interests in any of the securities or other financial products covered on the Kalkine website.