Panoramic Resources Limited

PAN Details

Reserves & Resources in June 2021: Panoramic Resources Limited (ASX: PAN) is involved in the mining and production of nickel deposits. PAN operates the Savannah nickel project and the Gum Creek gold project in Australia.

• On 22 July 2021, PAN declared45Mt of total mineral resources and 8.3Mt of ore reserves at the Savannah project as of 30 June 2021, the same as reported in 2020.
• In April 2021, the management sanctioned the restart of the Savannah project. Accordingly, PAN plans to re-estimate the resources and start the drilling exploration at the project in 2HFY21.

Q3FY21 Highlights:

• On 29 April 2021, PAN provided robust economic and technical outcomes from the detailed studies conducted to restart the Savannah project.
• PAN estimated an NPV of ~$353 million pre-tax at an All-In Sustaining Cost (AISC) of nickel at $6.36/lb. The expected mine life is 12 years, with nickel production of ~9,072 tonnes per year.
• The company has entered an offtake contract for the entire production at Savannah from FY23-FY28 and has secured US$45 million of debt financing until FY28.

Total Revenue & Net Income Trend for FY16-FY20; (Analysis by Kalkine Group)

Key Risks:

• Change in Commodity Prices: The company faces the risk of change in the prices of nickel, copper, and cobalt and level of production.
• COVID-19 Uncertainties: The COVID-19 pandemic has the potential to impact the company’s operations.

Outlook:

PAN will recommence the exploration activities in 2HFY21 to test new deposits at Savannah North and Savannah. The company plans to feed new resources into the current mine plan and parallel to the restart of operations at the Savannah project. PAN plans to recommence the ore processing in November and targets the first shipment of the concentrate in December 2021.

Valuation Methodology: EV/Sales 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 PAN gave a positive return of 50.0% in the past nine months and a positive return of 140.0% in the past year. The stock has recently reached its 52-weeks’ high level of $0.180. We have valued the stock using the Enterprise Value to Sales based illustrative relative valuation method and have arrived at a target price with a correction of high single-digit (in % terms). We believe that the company can trade at a slight premium than its peer median, considering the restart of operations at the Savannah project, plans prepared to resume resource definition and exploration drilling in 2HFY21. For this purpose, we have taken peers like Western Areas Limited (ASX: WSA), OZ Minerals Limited (ASX: OZL), Strandline Resources Limited (ASX: STA), and others. Considering the current trading levels, significant returns in the past year and past nine months, valuation, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $0.180, as on 26 July 2021, 11.36 AM (GMT+10), Sydney, Eastern Australia.

PAN Daily Technical Chart, Data Source: REFINITIV

Core Lithium Limited

CXO Details

Highlights of the Finniss Lithium Project: Core Lithium Limited (ASX: CXO) is involved in exploring and mining copper and lithium deposits in South Australia and Northern Territory. On 26 July 2021, CXO announced the results of a Definitive Feasibility Study (DFS), Stage 1, and a project mining extension scoping study at the Finniss Lithium Project.

• The Stage 1 DFS declared an increase of 30% in ore reserves and an initial mine life of eight years. As per the extension scoping study, the estimated mine life is up to 10 years, aided by updated mineral resources and ore reserves declared on 26 July 2021.
• The company estimates $384 million of pre-tax NPV from the Stage 1 DFS and Extension Scoping Study at a spot price of US$850.
• The production plan estimated for ten years consists of open-pit mining from the Carlton, Grants, BP33 prospects.
• CXO has entered a binding offtake agreement with Yahua to supply 75K tonnes of lithium spodumene concentrate per year and could potentially be part of Tesla’s supply chain. The company is advancing on talks for additional offtake and debt financing.

Q3FY21 (March 2021 Quarter):

• The Australian Federal Government has awarded the Finniss project a major project status (MPS).

• CXO confirmed the high-grade lithium assay results from the drilling at the Grants Deposit. The company also discovered gold deposits below the Far East belt at its Bynoe Gold Project in the Northern Territory via scout RAB drilling.
• CXO raised $40 million via the placement of 160 million shares to institutional investors.
• The company produced battery-grade lithium hydroxide (LH) monohydrate from the spodumene concentrate at the project.
• In Q3FY21, CXO entered an option contract to procure six mineral leases. The granted leases contain more than 30 lithium pegmatite targets near the location of the Finniss project.
• CXO received $39.02 million of net cash from the financing activities and held a $40.94 million of cash and cash equivalents balance as of 31 March 2021.

       Net Loss Trend from FY16-FY20; (Analysis by Kalkine Group)

Key Risks:

• The company faces the risk of mining and exploration and changes in the lithium prices on the ongoing projects.
• CXO faces the risk of raising adequate capital to fund the ongoing exploration programs.
  

Outlook: The company plans to start assessment drilling of the 30 new lithium pegmatite targets upon the sanction of approval and the start of the 2021 field season. CXO targets the start of mine construction on the Finniss project from the 2HFY21. The company expects to commence the lithium concentrate production from 2HFY22.

Stock Recommendation: The stock of CXO gave a positive return of 519.79% in the past nine months and a positive return of 561.11% in the past year. The stock is currently trading higher than the 52-weeks average price level band of $0.035 - $0.420. Considering the low trading levels, significant returns in the past nine months and past year, updated reserves and resources reported, and offtake contract with Yahua, the start of the mine construction in 2HFY21, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $0.298, as of 26 July 2021, 11.18 AM (GMT+10), Sydney, Eastern Australia.

CXO 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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