Venturex Resources Limited

VXR Details

Strategic Funding Package Announced: Venturex Resources Limited (ASX: VXR) is a base metals exploration and mining company. As on 25^th February 2021, the market capitalisation of the company stood at ~$135.59 million. On 24^th February 2021, VXR announced that Mr. Bill Beament, a mining executive, will become a key shareholder (after shareholder approval) and a Consultant (Part time) in the company. He will come on Board as an Executive Director on 1 July 2021. This is as per a plan of recapitalisation under which VXR has secured binding commitments for raising $14 million capital. The company will undertake Placement Offer of ~$14 million capital at $0.08 per share by the issue of 175.03 million new shares subject to the shareholder approval. As per commitments received, Mr. Beament will subscribe to $8.9 million of the total capital and $5.1 million will be allocated to institutional investors. Additionally, VXR will also undertake a fully underwritten 1 for 7 Entitlement Offer to seek up to ~$4.4 million. This will be extended to VXR’s existing shareholders at $0.08 per share by the issue of up to 55.34 million new shares. The company estimates the total value of the funding package, assuming all options attached with aforesaid offers will eventually be exercised at ~$58 million. 

Reinstatement of Quotation: As per VXR’s request, its securities were suspended from quotation on 18^th February 2021 pending the release of a funding announcement. On 24^th February 2021, ASX announced reinstatement of VXR securities to official quotation and lifting of suspension from trading pursuant to the above equity funding arrangement declared by the company.

Robust Drilling Results at Whim Creek, Northern Pilbara: On 5 February 2021, Anax Metals Limited (ASX: ANX) has announced results from metallurgical diamond drilling finished in November 2020 at the Whim Creek Copper-Zinc Project (WCCZP) in Western Australia. ANX is VXR’s Joint Venture partner on the aforesaid project and recently completed its 80% earn-in interest in the project from VXR. Based on the drilling at the Mons Cupri deposit in November 2020, ANX had confirmed the intersection near-surface massive or semi-massive sulphide and stringer Pb, Cu, Au, Zn, Ag mineralisation. The company is progressing well with feasibility study activities and has numerous work streams in progress. 

Q2FY21 Result Highlights: During the quarter, VXR continued to seek secondary approvals and necessary permits for the construction and development of its Sulphur Springs Project (SSP). On SSP, VXR finished a 6-hole exploration drilling programme at the XA8 and Breakers prospects for a total of 1,886 metres to test geochemical anomalism identified at the Breakers’ targets. On Project Evelyn, VXR is planning an exploration drilling programme (small) at FLTEM target within Evelyn tenement (E47/1209) as it considers this a high-priority target for gold/base metal mineralisation. It plans to undertake drilling once exploration restarts at the WCCZP in 2021 after the Pilbara wet season. During Q2FY21, VXR exercised 4.08 million options at $0.10 issue price. It held net cash of $2.6 million as on 31 December 2020.

Cash Flows from Operating Activities, Q2FY21 (Source: Company Reports)

Outlook: In relation to Mons Cupri drilling at WCCZP, ore sorting, and test work is presently in progress at both Steinert (Perth) and Tomra (Sydney). The metallurgical test work is expected to be finished towards the close of February 2021. On Sulphur Springs Copper-Zinc project, VXR is planning a drilling programme to target mineralisation extensions at Breakers.

Stock Recommendation: The stock of VXR gave a positive return of 135.71% in the past three months and a positive return of 307.40% in the past six months. The stock is currently trading close to its 52-weeks’ high price of $0.38. The stock of VXR has a support level of ~$0.316 and a resistance level of ~$0.348. On TTM basis, we have valued the stock using price to book value multiple of ~5.7x as compared to industry median (Metals & Mining) of ~3.2x and thus seems overvalued. Considering the current trading levels, significant returns in the past 3 months and 6 months, and valuation on TTM basis, we are of the view that most of the key positives have been factored at the current trading level. Hence, we suggest investors to wait for better entry levels and give an ‘Expensive’ rating on the stock at the current market price of $0.330, down by ~5.715% on 25^th February 2021.

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

Lefroy Exploration Limited

LEX Details

Decent Assay Results at Burns Prospect: Lefroy Exploration Limited (ASX: LEX) is involved in the exploration and mining of minerals. As on 25^th February 2021, the market capitalisation of the company stood at ~$61.20 million. LEX received assay results from the diamond drilling program of 10 holes to examine the depth and strike extensions at the Burns prospect on the Lefroy gold project. The company will follow up with drilling at intersection in LEFR260. The management announced robust results of high-grade copper and gold mineralisation at Burns prospect and plans to follow up at the earliest.

December 2020 Quarter Result Highlights: The company undertook exploration activities during the quarter to assess multiple target areas at Eastern Lefroy particularly at the Lucky strike exploration hub and Havelock Banded Iron Formation (BIF). The assay results are pending from the above explorations. However, the observatory assessment at Havelock prospect shows that the hole LEFR898 intersected sulphide altered BIF which hosts gold mineralisation. This enhances the discovery potential along the Havelock trend and Erinmore BIF. LEX conducted a multi target aircore, RC and diamond hole drilling at the Western Lefroy JV with Gold Fields. The results reinstated the understanding of the geological prospectivity at a level below Lake Lefroy. At Lake Johnston, LEX completed a 22-hole aircore drill program at the Bullseye nickel target and drilling discovered ultramafic intrusive rocks, which was in line with the geological model. Though the drilling results are pending, however, based on the observation of rocks LEX has lodged for an exploration licence (E63/2073). During December 2020 quarter, LEX raised $4.5 million via a share placement which was oversubscribed by the institutional investors. During December 2020 quarter, LEX’s cash inflows from financing activities was $4.40 million. LEX held Cash and cash equivalents of $4.1 million as on 31 December 2020.

Cash Flows from Financing Activities, Q2FY21 (Source: Company Reports)

Outlook: The company has scheduled next phase of drilling as of now and will include immediate diamond drilling to extend the mineralisation explored in LEFR260 on Lefroy gold project. For Lake Johnston project, LEX will enter the next exploration phase at Bullseye after receiving and analysing the pending drill results.

 Stock Recommendation: The stock of LEX gave a positive return of 270% in the past three months and a positive return of 174.07% in the past six months. The stock is currently trading above 52-weeks’ average price level of $0.125-$0.90. The stock of LEX has a support level of ~$0.705 and a resistance level of ~$0.774. On TTM basis, we have valued the stock using the price to book value multiple of ~5.4x as compared to industry median of ~1.1x and thus seems overvalued. Considering the current trading levels, significant returns in the past 3 months and 6 months, and valuation on TTM basis, we believe most of the catalysts have been covered in the stock price as of now. Hence, we suggest investors to wait for better entry levels and give an ‘Expensive’ rating on the stock at the current market price of $0.740, up by 45.098% on 25^th February 2021. The rise in share price can be attributed to the robust results of high-grade copper and gold mineralisation at Burns prospect.

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

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