Sunrise Energy Metals Limited

SRL Details

Major Project Status: Sunrise Energy Metals (ASX: SRL) was incorporated in 2007, deals in specialty materials and clean solutions. It uses Clean-iX for extraction and purification in the metals and precious metals mining space.

• On 6^th December 2021, it was awarded as a Commonwealth Government Major Project Status and was considered as important contributor in Australian Economy’s contribution by Minister of Industry, Energy and Emissions Reduction, the Honourable Angus Taylor MP.
• Its LOM (Life of Mine) economics includes a revenue of US$ 16.3 billion with EBITDA US$ 10.8 billion with an average NPV of US$ 1.2 billion.
• On 3^rd December 2021, it also got awarded the Major Projects Status for its Sunrise Battery Material Complex Project (US$ 2.4 billion) at Fifield.

1QFY22 & FY21 Updates:

• Change in Director’s Interest: Mr Sam Riggall changed his voting rights by acquiring 198,694 Unlisted Performing Rights.
• With the cash receipts from operating activities of ~AUD 22k for 1QFY22, the company closed its quarter with the cash balance of ~AUD 33.06 million at the end of 30^th September 2021.
• As per its Annual Report, its revenue and other income increased substantially from AUD 44k in FY20 to AUD 877k in FY21. Along with a substantial fall in net losses from AUD 197.67 million in FY20 to AUD 21.15 million in FY21.

Cash Balance Highlight (Source: Analysis by Kalkine Group) 

Technical Commentary: On the daily chart, SRL stock prices are sustaining above the rising trendline support level and continuously taking the support of the same. Moreover, the prices are trading above the trend-following indicators 21-period and 50-period SMA indicating positive momentum in the stock. Furthermore, the momentum oscillator RSI (14-period) is trading at ~55.44 level, indicating bullish momentum. An important support level for the stock is placed at AUD 1.72 while the key resistance level is placed at AUD 2.04.

Key Risks:

• COVID-19 and Omicron: The company is vulnerable to the risks associated with the impacts of COVID-19 and lockdown due to the new variant Omicron, which might further affect its operations.
• Regulatory Risks: The company is prone to non-approval from regulatory bodies, due to which its operations are at risk.

Outlook:  As per the Quarterly report, due to the mutual consensus on termination of its offtake agreement with Beijing Easpring, SRL now has left with 100% of its future nickel and cobalt production available, where its seeking for the financing. The proceedings related to talks with landowners, local councils, the NSW Govt. are in progress for access agreements related to key infrastructure including the ETL and water pipeline.

Stock Recommendation:  The stock of the company has given a positive return of ~9.25% in the past six months. Currently, the stock is trading below the average of its 52-week low and high levels of $1.315 and $3.600, respectively. Considering the ongoing talks with landowners, current trading levels, technical analysis, 1QFY22 performance and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $1.835, 10:45 AM (GMT+10), Sydney, Eastern Australia, as on 5 January 2022.

SRL Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and is subject to the factors discussed above alongside support levels provided.

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 the 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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