Stocks’ Details 

eMetals Limited

Response to ASX Price Query: eMetals Limited (ASX: EMT) is a mineral exploration company focused on acquiring and exploring projects that are a strategic fit with its portfolio of rare and strategic metals projects. As on 16 October 2020, the company’s market capitalisation stood at ~$14.76 million. Recently on 9 October 2020, ASX raised a query wherein it enquired about the substantial rise in the stock price on 8^th and 9th October 2020. In its response to ASX query, the company has informed that it is not aware of any information that could explain recent trading in the company’s securities and it confirmed that it is in compliance with the ASX listing rules.

Exploration Update: The company has commenced exploration activities at its wholly owned Twin Hills Project. As per the results of the recently completed 250-hole auger drilling program at project, there exist multiple gold mineralised structures in the area. The company is now preparing a Program of Works to test all identified targets.

FY20 Results: For the year ended 30^th June 2020, the company reported total revenue of $6,523 and a net loss of $1.145 million. During the year, the company received a total of $4.35 million as proceeds from the issue of shares. One of the important highlights of FY20 was the acquisition of the Poona Project, which contains extremely fractionated Lithium-Caesium-Tantalum (LCT) type pegmatites. At the end of FY20, the company had cash and cash equivalents of around $3.02 million, higher than the cash balance of 268k in FY19.

FY20 Results (Source: Company Reports)

Focus Areas: The company is focused on implementing work programs and executing project acquisitions that are strategic fit with its portfolio of rare and strategic metals projects.

Stock Recommendation: Over the last six months, the stock of EMT has provided a whopping return of ~414% to its shareholders. In the past one month alone, the stock price has increased by 80% on ASX. The stock is currently inclined towards its 52-weeks high price of $0.057. On a TTM basis, the stock is trading at a price to book multiple of 3.9x, higher than the industry median of 2.7x, demonstrating that the stock might be overvalued at current level. We have considered 14-day RSI (Relative Strength Index) and default values have been used. After careful consideration, it was observed that the stock is currently at over bought zone, hence, we expect a marginal fall in the stock price in the coming times. Considering the company’s substantial returns over the past few months, its current trading level and valuation based on TTM basis, we suggest an “Expensive” rating on the stock at the current market price of $0.036 on 16 October 2020.

Classic Minerals Limited 

Gekko Plant Acquisition: Classic Minerals Limited (ASX: CLZ) is mainly involved in the exploration of mineral resource projects, focussed on gold and nickel. The company recently confirmed that it has entered into a contract with Gold Processing Equipment Pty Ltd for the supply of Gekko Python components for the processing of ore at Kat Gap. The company has already received components like IPJ Jig Variable Speed Drive, one Vertical Shaft Impactor, one Spinner Concentrator and has paid $1.3 million, from the funds raised from the Security Purchase Plan. The company expects the remaining components to be delivered by first week of November 2020. The payment will be through the SPP funds raised during August 2020 and further capital raisings as required.

FY20 Results highlights: During the year ended 30 June 2020, the company incurred an exploration expense of $7.06 million, significantly higher than the expenditure of $1.74 million incurred in pcp. In FY20, the company received a research and development rebate of $1.3 million. The company’s net loss increased to $15.6 million in FY20, compared to $5.4 million in FY19, mainly due to the increase in exploration and administration expenses. Over the year, the company’s cash and cash equivalent grew to $488.6k, compared to $135k in FY19, mainly due to capital raising activities incurred in FY20. At the end of FY20, the company had total debt of $2.01 million.

FY20 Results (Source: Company Reports)

What to expect: Looking ahead, the company is focused on commencing mining operations at its Kat Gap project, located around 70km from the company’s Forrestania Gold project. It currently requires the Government’s approval to start mining operations. Further, the company is focused on exploring its explorations areas and establishing its exploration interest in prospective fields.

Stock Recommendation: The stock of CLZ has provided a return of 33.33% in the last six months. The stock is currently inclined towards its 52-weeks low price of $0.01. On the technical analysis front, the stock has a support level of ~$0.001 and a resistance of ~$0.003. For FY20, the company’s current ratio stood at 0.14x, lower than the industry median of 1.74x. Considering the company’s highly leveraged balance sheet, low liquidity level, and weak fundamentals, we suggest investors to avoid the stock at the current market price of $0.02 on 16 October 2020.

Auroch Minerals Ltd

Commences Surface Copper Sampling at Arden: Auroch Minerals Ltd (ASX: AOU) is a mineral exploration company focused on developing high grade nickel sulphide projects in Western Australia. On 16 October 2020, the company announced that it has started a surface sampling programme along the prospective copper trends of its Arden Project (Arden) in South Australia. This programme will help the company in defining a significant strike length of high-grade copper at surface at Arden. Following this programme, the company intends to commence surface-sampling programmes at other areas of the Arden that are identified as highly prospective for Copper, including the trend to the northeast of the Kanyaka Prospect.

$2.9Mn Over-Subscribed Placement: On 25 September 2020, the company announced that it has received firm commitments for a placement to raise around $2.9 million, demonstrating support from professional, sophisticated, and other investors. The proceeds from the placement will be used to fund the company’s aggressive exploration programmes, in particularly drilling, for further high-grade nickel sulphide mineralisation at the Saints and Leinster Nickel Projects.

FY20 Result Highlights: For the year ended 30 June 2020, the company’s reported total net loss of $542,802, significantly lower in comparison with the loss of $1.38 million incurred in FY19. During the year, the company received net proceeds of $3.45 million from the issue of shares and options. As at 30 June 2020, the company had cash and cash equivalent of $3.44 million.

FY20 Results (Source: Company Reports)

Outlook: The company currently has a pipeline of exploration programmes producing constant news flow and results. AOU has ongoing drill programmes at the Saints & Leinster projects. With a cash balance of around $5 million (as at 2^nd October 2020), the company is well funded for exploration and expansion of the nickel and copper portfolio, offering material longer-term upside.

Stock Recommendation: Over the last six months and three months period, the stock of AOU has provided a return of 200% and 154.7%, respectively. The stock is currently inclined towards its 52-weeks high price of $0.140. On the technical analysis front, the stock has a support level of ~$0.15 and a resistance of ~$0.16. On the face of decent fundaments, we are of the view that the stock has limited upside. Considering the company’s significant returns in the past six and three months period, and its current trading level, we suggest our investors to wait for better entry levels and recommend an ‘Expensive’ rating on the stock at the current market price of $0.135, up by 28.57%, on 16 October 2020, owing its announcement related to the commencement of surface sampling programme its Arden Project.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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