Vimy Resources Limited

VMY Details

Latest Developments: Vimy Resources Limited (ASX: VMY) is engaged in the exploration and development of projects including the Mulga Rock Project and the Alligator River Project. On 2 March 2022, VMY announced a proposal to buy back ~2,036,667 shares on 16 March 2022 under an employee share redemption scheme.

Strategic Review Update:

• VMY is currently undertaking a strategic review on the Mulga Rock project and Alligator River project. It plans to develop the Mulga Rock project single-headedly or with a joint venture partner. The Board is in discussion with interested parties for a range of potential value accretive deals to deliver the shareholder’s value. In addition, VMY has considered joint venture and full or partial divestment opportunities for the Alligator River Project.
• The Hon. Cheryl Edwardes AM will now continue as the Chair until the strategic review is completed and concluded. In another key managerial update, Dr. Tony Chamberlain has moved to the position of COO.

RIU Explorers Conference Presentation & Q2FY22 (December 2021) Highlights:

• VMY plans to undertake BFS and project financing for the Mulga Rock project in 2022 and mine development from 2023-2024. VMY foresees a positive change in the global sentiment towards nuclear power as the baseload energy of choice.
• During Q2FY22, VMY started fieldwork at the Alligator River (Northern Territory) and Kingston Project (in Western Australia).
• VMY obtained approval from the Department of Mines, Industry Regulation and Safety (DMIRS), Western Australia for its Mine Closure Plan, Mulga Rock Mining Proposal, etc., and started an early works program.
• At the Alligator River Project, VMY undertook field work activities comprising a soil sampling program.
• VMY held ~$16.23 million cash and cash equivalents as of 31 December 2021.
  

Net Loss FY21 Vs. FY20; (Analysis by Kalkine Group)

Key Risks: VMY faces the risk of exploration, reserves and resources estimation, shortage of skilled labour, and regulatory changes. 

Outlook:

• VMY plans to hold an online general meeting of shareholders at 10:00 AM on 23 March 2022.
• The company is progressing with the development of projects targeting its first uranium production in 2025 on the Mulga Rock project.
• In 2022, VMY plans to start a drilling program to grow estimated resources and undertake geophysical work and soil sampling, etc at the Alligator River project.

Technical Note: On the daily chart, VMY prices are trading below the rising trend line resistance zone and facing the resistance of the same. Moreover, the momentum oscillator RSI (14-period) trading near an overbought zone at ~66.12 level, which might indicate the possibility of a correction in the stock. However, the prices are trading above the trend-following indicator 21-period SMA, which may act as a support level. An important support level for the stock, is placed at AUD 0.185 while the key resistance level is placed at AUD 0.252.

Stock Recommendation: The stock of VMY gave a positive return of ~83.33% in the past six months and a positive return of ~46.67% in the past nine months. The stock is currently trading above its 52-weeks’ level of $0.088 - $0.310. On a TTM basis, the stock of VMY is trading at a price to book value multiple of 8.3x higher than the industry (Uranium) median of 6.0x, thus seems overvalued. Considering the current trading levels, technical analysis stated above, and key risks associated with the business, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $0.230, as of 2 March 2022, 1:45 PM (GMT+10), Sydney, Eastern Australia.

VMY Daily Technical Chart, Data Source: REFINITIV  

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.

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