Stocks’ Details

E2 Metals Limited

Successful Institutional Placement to Fund Exploration: E2 Metals Limited (ASX: E2M) is engaged in the exploration and evaluation of mineral deposits in Australia, New Zealand, and Argentina. As on 20 November 2020, the market capitalisation of the company stood at ~$109.43 million. The company has recently raised $13 million by issuing new fully paid ordinary shares to institutional and sophisticated investors at a price of $0.73 per share. The share placement will strengthen its balance sheet and will fund drilling at the Mia gold and silver discovery. 

Quarterly Highlights (For the Period Ended 30 September 2020): During the quarter ended 30 September 2020, the company has completed the phase 1 drilling at the Mia and Patricia prospects and started the planned 4000m combined reverse circulation and diamond drill program at the Conserrat Project. At the end of the quarter, the company reported a healthy financial position with a cash of over $5.2 million and used $547k of cash for operating activities.

Consolidated Statement of Cash Flows (Source: Company Reports)

Stock Recommendation: The company is likely to receive further assay results until Christmas as drilling continues at all prospects including Ro, Florencia, Veta Blanca, and Emilia. As per ASX, the stock of E2M is inclined towards its 52-weeks’ high levels of $1.01 and thus retains limited potential for further growth. The stock of E2M gave a return of 277.27% in the past three months and a return of 268.88% in the last one month. On a technical front, the stock of E2M has a support level of ~$0.621 and a resistance level of ~$0.917. Considering the current trading levels, volatile market conditions, and key investment risks, we suggest our investors to wait for a better entry level and give an ‘Expensive’ rating on the stock at the current market price of $0.830 on 20 November 2020.

Apollo Consolidated Limited

Cleo Discovery Continues to Take Shape: Apollo Consolidated Limited (ASX: AOP) is engaged in the exploration of minerals in Western Australia. As on 20 November 2020, the market capitalisation of the company stood at ~$83.41 million. The company has recently completed gold mineralization in nine infill Reverse Circulation drill holes at the Cleo discovery, forming a footprint of up to 150m wide that remains open to strike and depth.  

Quarterly Highlights (For the Period Ended 30 September 2020): During the third quarter ended 30 September 2020, the company systematically worked through exploration opportunities to build and refine mineral resources through continued infill, extensional & exploration reverse cycle and diamond drilling. During the quarter, the company used $204k of cash for operating activities and reported a healthy financial position with a cash balance of $19.8 million.

Cash Flows from Operating Activities (Source: Company Reports)

What to Expect: The company is focusing on selected infill drilling to upgrade lower confidence and inferred mineral resources and is aiming to extend its gold mineralization in and around the constraining pit-shells. The company seems on track on with the diamond drilling below the Rebecca deposit and is targeting high-grade positions suitable for future underground mining.

Stock Recommendation: As per ASX, the stock of AOP is trading slightly above the average 52-weeks’ levels but retains the potential for further growth. The stock of AOP gave a negative return of 19.99% in the past three months and a negative return of 6.24% in the last one month. On a technical front, the stock of AOP has a support level of ~$0.214 and a resistance level of ~$0.347. Considering the current trading levels, key investment risks, modest long-term outlook, and high-grade positions for future underground mining, we recommend a ‘Speculative Buy’ on the stock at the current market price of $0.30, down by 3.226% on 20 November 2020.

Red River Resources Limited

Red River Hits High-Grade Gold at Currys Lode: Red River Resources Limited (ASX: RVR) is engaged in the production of zinc, copper, and lead concentrate. As on 20 November 2020, the market capitalisation of the company stood at ~$144.97 million. The company has recently completed seven diamond drill holes for a total of 776.4 metres and the initial drill program confirmed the presence of high-grade gold-tungsten mineralization. The company plans to start gold production at Hillgrove by end of CY20, using material from existing stockpiles.

Quarterly Highlights (For the Period Ended 30 September 2020): During the quarter ended 30 September 2020, the company reported record copper concentrate production of 4,073 DMT at its Thalanga Operations and reported EBITDA of $13.8 million. In the same time span, the company generated revenue of $35.6 million from concentrate sales and invested $5.6 million in capital development. At the end of the quarter, the company reported a healthy balance sheet with no debt and a cash balance of $12.5 million.

Base Metal Concentrate Production by Quarter (Source: Company Reports)

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation (Illustrative)

EV/EBITDA Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: During the quarter, the company reported an increase in the production of zinc and lead concentrate. The company will conduct its AGM on 25 November 2020. As per ASX, the stock of RVR is trading very close to its 52-weeks’ high level of $0.31 and thus retains limited potential for further growth. On a technical front, the stock of RVR has a support level of ~$0.114 and a resistance level of ~$0.30. The stock of RVR gave a return of 86.20% in the past three months and a return of 35% in the last one month. We have valued the stock using the EV/EBITDA multiple based illustrative relative valuation and have arrived at a downside of higher single-digit (in % terms). Considering the higher trading levels, volatility in the current market environment, key investment risks and valuation, we suggest investors to wait for a better entry level and give an ‘Expensive’ rating on the stock at the current market price of $0.270, down by 3.572% on 20 November 2020.

Daily Comparative Chart (Source: Refinitiv, Thomson Reuters)

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