Coronado Global Resources Inc

Sharp Fall in Metallurgical Coal Prices: Coronado Global Resources Inc (ASX: CRN) is primarily engaged in the development and operation of premium quality metallurgical coal mines in Queensland, Australia. The market capitalisation of the company stood at $797.38 Mn as on 12^th August 2020. Recently, the company released its results for 1H FY20, wherein, it reported realised metallurgical coal pricing of US$97.3 per tonne, down 29.2% as a result of weak market conditions and steep fall in metallurgical coal prices. CRN reported production and sales volume of 8.0 Mt and 8.3 Mt, reflecting a fall of 23.1% and 20.2%, respectively, on pcp. The company has decided to suspend dividend for 1H FY20 in line with current market conditions and its distribution policy.

In a recent update for correction to its half-yearly results, the company stated that operating cost per tonne sold was US$79.7, up 2% and gross operating costs went down by 18%.

Key Metrics (Source: Company Reports)

Outlook:  The company stated that its US operations are likely to produce saleable coal at a lower capacity to match market demand and reduce inventory levels during 2H FY20.

Stock Details: During the half-year, net cash used in the operating activities stood at US$7.6 million, against US$301.2 million cash derived from operating activities in 1H FY19. As at 30^th June 2020, the cash and cash equivalents of the company stood at US$36.1 million, while net debt was US$404.9 million. The stock of CRN is currently in a trading halt, as the company is expecting to release an announcement in relation to capital raising. The securities of CRN are likely to remain in a trading halt until the earlier of the commencement of normal trading on 18 August 2020 or when the announcement is released to the market. The stock last traded at $0.825 per share on 11^th August 2020.

Altura Mining Limited

Discovery of Gold Nuggets: Altura Mining Limited (ASX: AJM) is engaged in the mining, processing, and sale of lithium ore. The market capitalisation of the company stood at $209.04 Mn as on 12^th August 2020. Recently, the company announced that it has discovered 37 gold nuggets, weighing a total of 25 grams, at the Lucky 13 Prospect. The company added that the nuggets were discovered within a mapped geological and structural corridor of around 4 kilometres in length which extends between the historic Cleopatra and Hazelby Prospects on Altura’s E45/2363 tenement. During the quarter ended June 2020, the company reported lithium concentrate production of 46,316 wet metric tonnes. AJM reported an average operating cash cost of US$369/wmt produced.

Production (Source: Company Reports)

Outlook: The company expects production and sales for September 2020 quarter in line with previous quarters. AJM                anticipates operating cash costs to be in line with the previous results of US$350 to US$390/wmt.

Stock Details:  The company closed the June 2020 quarter with cash and cash equivalents of $8.0 million. The stock of AJM has moved up by 89.19% and 55.56% in the past three and six months, respectively. As of now, the securities of AJM are under trading suspension, as the company is expecting to release an announcement with respect to changes in its current financing arrangements. The stock of AJM last traded at $0.070 on 7^th August 2020.  

Broo Limited

Agreement with CUB Pty Ltd: Broo Limited (ASX: BEE) is engaged in the brewing and manufacturing of premium Australian beer. The market capitalisation of the company stood at $12.07 Mn as on 12^th August 2020. Recently, the company announced that it has inked a contract brewing agreement with CUB Pty Ltd to produce Broo Premium Lager and Australia Draught. The agreement commenced in August 2020 and would continue for a period 24 months till 31 August 2022. During the June 2020 quarter, net cash used in the operating activities stood at $0.137 million. Amid the current uncertain scenario, the company is managing its cash flows in an effective manner. BEE executed a number of positive steps to address the economic effect of the Government imposed restrictions to control the spread of COVID-19. Some of the initiatives included, reduction in staff numbers, reduced overhead costs, and assessment of long term sources of capital.

Cash Flows (Source: Company Reports)

Guidance: For the September quarter, the company is anticipating a lesser level of trading cash flow. Also, the company is focused on increasing domestic sales and distribution.

Key Risks:  The company’s business activities are exposed to financial risks, such as credit risk and liquidity risk. Credit risk arises from the default by a counterparty on their contractual obligations, while liquidity is influenced by the inability of the company to address its short-term obligations. BEE manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities.

Stock Recommendation: At the end of June 2020 quarter, the cash balance of the company stood at $76k. Gross margin of the company stood at 23.3% in 1H FY20, reflecting YoY growth of 18.4%.  The stock of BEE Limited has moved up by 21.43% in the last three months. The stock is inclined towards its 52-week high of $0.033. BEE has an EV/Sales multiple of 5.1x against the industry median (Beverages) of 3.4x on TTM basis. Therefore, considering the current trading levels and price movement, we have a wait and watch stance on the stock at the current market price of $0.025 per share, up by 47.059%, owing to the signing of the agreement.

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