Galan Lithium Limited

GLN Details

December 2020 Quarter Highlights: Galan Lithium Limited (ASX: GLN) is a developer of lithium brine projects in South America’s Lithium Triangle in Argentina. It has 3 key projects under its umbrella -Candelas, Hombre Muerto West (HMW), and Greenbushes South Lithium Project (GSLP). As on 12^th February 2021, the market capitalisation of the company stood at ~$121.07 million. On 11^th February 2021, the company notified ASX via a secondary trading notice pursuant to Section 708A (5) of the Corporations Act 2001.  GLN notified ASX regarding the issuance of 2.3 million fully paid ordinary shares in the company’s capital structure in relation to the conversion of 300,000 options to shares and another 2 million shares issued under a final placement without disclosure.

During the December quarter, the company received the economic outcomes of Preliminary Economic Assessment (PEA) study done for the HMW Project. The study estimated a production output of 20k tonnes per year of battery grade lithium carbonate product. The company has estimated total life of mine production to be 40 years for producing ~800kt of lithium carbonate (LCE) and forecasts total initial resource to feed the project at 1.37Mt LCE, ~ 60% of the total resource of HMW. As a result, the Project has the potential to increase its production while maintaining a long mine life. The company used $291k of net cash in operating activities and held ~$2.95 million of cash and cash equivalents at the end of 31 December 2020.

Preliminary Economic Assessment (PEA) Results, Highlights (Source: Company Reports)

Oversubscription of Placement Worth 20Mn Shares: On 27 January 2021, the company announced receiving an over-subscribed placement of 20 million shares at $0.50 per share via firm commitments. With this placement, GLN plans to raise $10 million (before costs). The proceeds of the placement, along with cash reserves of $4.6 million is expected to be utilised for development of the Hombre Muerto West lithium brine project, initial exploration work at the Greenbushes South lithium project and for working capital needs. GLN also signed a sale and JV with Lithium Australia NL for an 80% interest in Greenbushes South Lithium project post the quarter. GLN will be fully funded for its planned piloting, study costs, and new exploration work for FY21.

Stock Recommendation: The stock of GLN gave a positive return of 312% in the past three months and a positive return of 232.25% in the past six months. The stock is currently trading towards its 52 weeks high level of $0.65. The stock of GLN has a support level of ~$0.49 and a resistance level of ~$0.554.  On TTM basis, the stock of GLN has been valued using price to book value multiple of 6.1x as compared to industry median (Basic Materials) of ~3.2x and is thus seems overvalued. Considering the current trading levels, negative ROE, significant returns in the past months, and valuation on TTM basis, we are of the view that most of the key catalysts have been factored in the stock performance. Hence, hwe suggest investors to wait for better entry levels and give an ‘Expensive’ rating on the stock at the current market price of $0.515, up by ~0.98% on 12^th February 2021.

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

Sayona Mining Limited

SYA Details

1HFY21 Results Declared: Sayona Mining Limited (ASX: SYA) is engaged in the exploration, mining, and development of minerals. As on 12^th February 2021, the market capitalisation of the company stood at ~$145.83 million. The Group recently reported increase in revenue to $336k in 1H21 from $9,472 in 1H20. The revenue constitutes interest received from unrelated parties, government subsidy, and other income. SYA reported lower loss of $983k in 1H21 vs $1,372k in 1H20. During the quarter, the company received $315k of government subsidies, incurred lesser capex of $1.59 million on pcp basis, and received $3.94 million from proceeds of issued shares. The company received $6.14 million of net cash through financing activities during the quarter. Net cashflow used from operating activities came in at $439.53k. It held $4.58 million of cash and cash equivalents balance as on 31 December 2020.

Income Statement 1H21, Highlights (Source: Company Reports)

Outlook: On Authier project, the Group is subject to review procedures under the BAPE (bureau d'audiences publiques en environnement) and environmental impact assessment. Under the review, it is seeking approval to process order of 2.6k tonnes per day and forecasted yearly average spodumene concentrate production of ~115k tonnes. For Tansim project, the company is planning further exploration work in FY21, including Phase 2 drilling at the Viau-Dallaire prospect and reconnaissance sampling at the new acreage.

Stock Recommendation: The stock of SYA gave a positive return of 457.14% in the past three months and a positive return of 333.33% in the past six months. The stock is currently trading slightly above the average of its 52 weeks low and level of $0.006-$0.056, respectively. The stock of SYA has a support level of ~$0.035 and a resistance level of ~$0.044. On TTM basis, the stock of SYA is valued using price to book value multiple of ~6.2x as compared to industry median (Metals & Mining) of ~3.2x and is thus seems overvalued. Considering the current trading levels, significant returns in the past months, negative ROE, and valuation on TTM basis, we are of the view that most of the positives of the company have been factored in at current juncture. Hence, we suggest investors to wait for better entry levels and give an ‘Expensive’ rating on the stock at the current market price of $0.039 as on 12^th February 2021.

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

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