Jupiter Mining Limited

JMS Details

Board Changes: Jupiter Mines Limited (ASX: JMS) operates the Tshipi Manganese Mine in South Africa and markets manganese ore. JMS holds 49.9% interest in Tshipi e Ntle Manganese Mining Limited (Tshipi), the operator of the Tshipi Borwa Manganese Mine in Australia & South Africa. Recently, on 20 October 2021, JMS held a General Meeting where Brian Gilbertson ceased to be a Director and Mr. Priyank Thapliyal ceased to be the MD of the firm. However, Mr Thapliyal will continue in his role as the CEO of JMS. JMS Board is searching for a replacement and will appoint an interim Chairman in the days ahead.

1HFY22 Results:

• Dividend Announced: JMS declared an unfranked dividend of $0.005 per share for 1HFY22.
• Revenue Growth: JMS recorded a 15% YoY increase in revenue to $3.75 million in 1HFY22 versus $3.31 million in 1HFY21.
• Higher Sales Volume: The South African marketing branch of JMS sold ~841,254 dmt of manganese in 1HFY22 versus 559,843 dmt in 1HFY21.
• NPAT Decline: The NPAT declined by $2.2 million (7% YoY) to $27.56 million during 1HFY22.
• Divested CYIP Project: During 1HFY22, the company sold off its Central Yilgarn Iron Project assets and demerged into Juno Minerals Limited (Juno), a newly listed entity. JMS realised $12.62 million profit from the demerger of Juno.
• Cash Balance: The company held $22.91 million cash and cash equivalents as of 31 August 2021 versus $60.62 million as of 28 February 2021.

Total Revenue & Net Income Trend from 1HFY20-1HFY22; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of a fall in manganese prices, changes in production and demand, supply chain disruptions, and regulatory hurdles.

Outlook: The company is improving on the Lost Time Injury Frequency Rate (LTIFR) quarterly with no LTI (lost time injuries) registered in Q2FY22. It aims to maintain this performance through improvement in interventions.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of JMS gave a positive return of ~2.22% in the past month and a negative return of ~30.46% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.202 - $0.375. The stock has been valued using the P/E multiple based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers’ average P/E multiple, considering the potential legal risk related with the registration of Tshipi for a vaccination site, depressed manganese prices, and increased logistics costs. For this purpose of valuation, few peers like Mineral Resources Limited (ASX: MIN), Nickel Mines Limited (ASX: NIC), South32 Limited (ASX: S32), and others have been considered. Considering the current trading levels, increase in revenue & profit from operations before tax in 1HFY22, higher branch sales in South Africa in 1HFY22, valuation, and associated business risks, we give a ‘Speculative Buy’ rating on the stock at the closing price of $0.230, down by ~2.128% as of 28 October 2021.

JMS Daily Technical Chart, Data Source: REFINITIV  

Resolution Minerals Limited

RML Details

Capital Raise via SPP: Resolute Minerals Limited (ASX: RML) engages in the exploration of gold, vanadium, and iron ore in Alaska in the US. In Northern Australia, RML undertakes the exploration of cobalt, copper, and other battery metals. On 26 October 2021, it obtained ~$1.74 million applications under a Share Purchase Plan (SPP) and planned to raise ~$1.5 million as previously declared.

• Issuance of Shares: On 26 October 2021, RML issued ~86.92 million ordinary shares at ~$0.02 per share to shareholders under the SPP. RML will offer options to investors in the ratio of 2: 1 basis at $0.03 per share. The options’ issue will be subject to shareholders’ approval at the AGM and issuance of a “cleansing prospectus” in time.

Completion of a Trenching Program: On 25 October 2021, RML completed the trenching program at the Tourmaline Ridge Prospect on the 64North Project, Alaska.

FY21 Highlights:

• RML reported improvement in net loss from ~$1.28 million in FY20 to ~$983,485 in FY21 mainly due to lower impairment expense, more labour recoveries, etc.
• The company held ~$1.751 million cash and cash equivalents and had no debt on its balance sheet as of 30 June 2021.

Net Loss After Tax Trend from FY17-FY21; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of exploration, cost-effective funding for projects, reserve estimation, gold price changes.

Outlook:

• The company plans to deploy funds for regional drilling regional exploration at the Benmara Battery Metals Project in Australia and the 64North Gold Project in Alaska, for working capital needs, and generation of precious metals and battery projects from the recent capital raise under the SPP.
• At the 64North project, RML has submitted the samples for assay results and plans to undertake further trenching & drilling programs post the receipt of results from the first trenching program (expected in late December 2021).
• RML will undertake its 2021 AGM (Annual General Meeting) on 11 November 2021.

Stock Recommendation: The stock of RML gave a negative return of ~4.99% in the past month and a negative return of ~26.92% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.018 - $0.045. On a TTM basis, the stock of RML is trading at a price to book value multiple of 0.6x, lower than the industry (Metals Mining) median of 2.5x, thus seems undervalued. Considering the current trading levels, nil debt & improvement in loss after tax in FY21, exploration work planned across projects for FY22, valuation on a TTM basis, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing price of $0.019, down by ~5.001%, as of 28 October 2021.

RML 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.

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.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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