Australian Mines Limited

AUZ Details

Recent Induced Survey Indicates Porphyry Copper – Gold Target: Australian Mines Limited (ASX: AUZ) is involved in mining, exploration with major business activities in battery materials. On 7 June 2021, AUZ discovered distinct chargeability anomaly in Flamington project, via polarisation geographical survey. The results indicate project’s similar geophysical and geographical characteristics with copper and gold deposits.

P-CAM Production Plant Commence Construction Phase: On 3 June 2021, AUZ commissioned construction of Sconi Project’s pilot P-CAM (precursor cathode active material) production plant. Integration of P-CAM production plant with Sconi Project’s processing plant will add value to processed nickel sulphate and cobalt sulphate crystals and increase salable price of P-Cam Products.

A Sneak-Peak in Q3FY21 Results: During the quarter, AUZ aimed to ramp-up developments in Sconi Projects in terms of active discussions & negotiations with financiers, accelerated research & development into P-CAM integration and strategizing structural changes of Sconi Project processing plant to significantly decrease capital expenditure. During the quarter AUZ registered higher cash balance at $5.25 million and outflow from operating cash flows of $821,000. AUZ accelerated R&D activities in attributed to the production of P-CAM for Nickel-Cobalt-Manganese (NCM) batteries.

Cash Flow from Operations (Source: Company Reports)

Key Risks: AUZ does not have concrete agreements with potential partners for its flagship projects. There are high operational risks in integration of Sconi Project with P-CAM. No revenue has been generated since 2016 positioning AUZ in an uncompetitive spot.

Outlook: Broader industry aspects indicate exploding demand for battery materials over the medium term due to rising scarcity of high-grade sulphide grade deposits. AUZ have high expectations from its well positioned cobalt-producing nickel operations at Sconi project in meeting supply for use in electric vehicle businesses. Sconi Project’s Bankable Feasibility Study (BFS), updated in 2019, summarized an expected mile life of more than 30 years with mineral resource tonnage exceeding 115 million tonnes. Consequently, outcomes from discussions with potential off take partners suggest likelihood to seek binding contracts with terms up to 10 – 15 years.

Stock Recommendation: AUZ prices were trading in a bearish tone from past 5 months after the prices hit 52-week high levels ~0.040. Prices have taken a crucial support from 0.018 level and shoot up today and made a high of 0.025. Prices are now getting resistance of the upward sloping trend line resistance level on the daily chart that further indicates selling pressure might occur in the coming trading sessions. RSI (14) is hovering in the overbought region at ~72 that suggests profit booking might occur from the resistance levels. Immediate support level 0.018 while immediate resistance level is 0.027. Considering the nil revenue generation, no concrete contracts purchase agreements, high exploration risks, high-cost of integration of P-CAM and Sconi project, technical levels, we suggest investors to book profit and wait for a better entry level. Hence, we give a “Sell” rating on the stock at the current market price of $0.024, up 23.076% as of June 11, 2021.

AUZ Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions 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 analysis has been achieved and subject to the factors discussed above alongside support levels provided.

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.

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