Stocks’ Details

Pantoro Limited 

Encouraging Drilling Results: Pantoro Limited (ASX: PNR) is primarily engaged in gold mining, processing, and exploration at the Halls Creek project in Western Australia. The company is also focused on its 50% owned Norseman Project. The company recently provided results from its maiden underground diamond drilling program at the high-grade OK Underground Mine at the Norseman Gold Project, with ~14,000 metres drilled. Drilling in the Star of Erin Lode and O2 Lode returned high-grade results. In July 2020, the company received encouraging results from the Lord Percy Deposit at the Maybell Mining Centre. In the same month, the company announced about the intersection of very high-grade gold mineralisation from the Sailfish Prospect at Norseman. Drilling at the prospect returned 8.1 m @ 67.29 g/t Au from 78.6 m downhole.

Star of Erin Lode Results (Source: Company Reports)

O2 Lode Results (Source: Company Reports)

Capital Raising: The company also announced that it will be raising $55 million, comprising $50 million in firm commitments under a placement at an issue price of 24 cents per share and a share purchase plan to raise up to $5 million. Under the SPP, the company received total applications of $7 million, which will be scaled back to a total of $5.5 million. 

Quarterly Highlights: During the June quarter, the company’s production at the Halls Creek Project increased to 9,586 ounces and operating cash flow increased by 78% QoQ. Total project free cash flow amounted to $4.8 million. By the end of the quarter, the company maintained a strong balance sheet, cash, and gold balance of $24.0 million, with no debt. Notably, as on 31^st December 2019, the company had cash and short-term investments amounting to $29.4 million and debt amounting to $18.9 million.

Outlook: The company remains focused on future growth and significant exploration success at the Norseman Project. With the recent capital raising, the company remains well-positioned to fund activities at Norseman.

Key Risks: The company is primarily exposed to financial risks, including credit risk, liquidity risk, interest rate risk, and commodity price risk. 

Valuation Methodology: Price to Earnings Multiple Based Relative Valuation (Illustrative)

Price to Earnings Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The stock of the company gave positive returns of 167.05% in the last six months. In the past 1 month, the stock has corrected by 11.32%. Currently, the stock is trading near its 52-week high of $0.290. On the technical analysis front, the stock has a resistance level of $0.283 and support level of $0.19. We have valued the stock using the P/E multiple based illustrative relative valuation method and arrived at a price correction of high single-digit (in percentage terms). Considering the latest developments, capital raising, price movements, valuation, and current trading levels, we suggest investors to wait for better entry levels, and hence, give an “Expensive” rating on the stock at the current market price of $0.235 on 8^th September 2020.

Amani Gold Limited 

Restructuring of the Board: Amani Gold Limited (ASX: ANL) is primarily engaged in acquiring and exploring mineral interests for precious metals and energy. On 27^th August 2020, Chan Sik Lap decided to resign from the post of Managing Director effective immediately. Klaus Eckhof will assume the role of Executive Chairman in an interim capacity. The company also appointed Maohuai Cong as a Non-Executive Director.

Quarterly Highlights: During the quarter, the Kebigada resource at the Giro Gold Project followed diamond core drilling results which successfully targeted deeper high-grade sulphide associated gold mineralisation within the central core of the Kebigada deposit. Drillholes GRDD034 and GRDD035 indicated high-grade gold mineralisation. In June 2020, the company completed a bookbuild for a two-tranche placement to sophisticated and professional investors to raise up to $2.55 million, to fund its exploration activities. As on 30^th June 2020, the company had a cash balance of $1.135 million. Cash used in operating activities amounted to $138k.

Operating Cash Flow (Source: Company Reports)

Plans in Pipeline: The company has in place a drilling campaign of four core holes at the Kebigada deposit, each nominally 500m in length for a total of 2,000m. Drilling is expected to commence in October 2020, subject to the availability of diamond core drill rigs.

Key Risks: The group is exposed to credit risk, liquidity risk, and market risk, from its use of financial instruments. The company is currently at a crucial stage of development and any shortage of funding or default by counterparties may hinder the process of exploration. Moreover, the planned drilling for October 2020 is dependent on the availability of diamond core drill rigs, which is subject to COVID-19 impacts. 

Stock Recommendation: The stock of the company gave positive returns of 33.33% in the last three months. On 4^th September 2020, the stock price went up by 100% and on 3^rd September, the price dipped 50%, representing high volatility. Over the past 3 months, the closing price of the stock has been in the ambit of $0.001 and $0.002, which can be considered as the support and resistance level, respectively. Therefore, considering the update regarding the resignation of the managing director, risk related to drilling planned in October, and volatile price movements, we suggest investors to avoid the stock at the current market price of $0.002 as on 8^th September 2020.

3D Resources Limited 

Placement of $1.225 Million to Accelerate Activities: 3D Resources Limited (DDD) is engaged in the exploration and evaluation of gold and copper projects. The company recently responded to the ASX query regarding the increased volume and price of its stock. In its response, the company stated that it has made all the relevant announcements that may impact the price and volume and will not be able to provide an explanation for the recent trading in its securities. In another announcement, the company stated that it has completed the $1.225 million Placement to accelerate the Adelong Goldfield Project. Under the placement, the company will issue 245 million shares at $0.005 each.

IPO of Subsidiary: The company announced that it is seeking shareholder approval for an IPO of Cosmo Gold Pty Ltd, its wholly owned-subsidiary, which holds all its interests in the Cosmo Newbery gold project. The company has proposed to raise $4.5 million through the IPO. If approved, the IPO will enable DDD to separately focus on its short-term goal of recommencing production at the Adelong Goldfield in Southern New South Wales, while Cosmo Gold funds the Cosmo Newbery gold project.

Increase in Mineral Resource: On 17^th August 2020, the company announced a 42% increase of gold in

Resources at the Adelong Goldfield, particularly at the Caledonian, Donkey Hill and Currajong deposits. 

Quarterly Highlights: In the June 2020 quarter, the company completed the acquisition of the Adelong Goldfield, with funding from a capital raising of $2.44 million. Later, the company commenced a strategic review of near-term cash flow options for the Adelong Goldfield. As on 30^th June 2020, the company had a cash balance of $406k, with an addition of $236.5k after June 2020. Cash used in operating activities during the quarter amounted to $188k.

Operating Cash Flow (Source: Company Reports)

Key Risks: The company is mainly exposed to liquidity risk, as it requires a continuous flow of funds for exploration. DDD is also exposed to interest rate risk as it holds funds at variable interest rates. Moreover, financial instruments held in currencies other than the AUD expose the company to foreign currency risk. 

Stock Recommendation: The stock of the company gave whopping returns of 128.57% and 300% in the last 3 months and 6 months, respectively. Currently, the stock is trading close to its 52-week high of $0.010. During 1HFY20, the company had a current ratio of 0.15x, as compared to the industry median of 1.83x. On the technical analysis front, the stock has a resistance level of $0.01 and support level of $0.005. We are of the view that most of the positives have been factored in the current market price. Hence, considering the ongoing business developments, price movements, and current trading levels, we suggest investors to wait for further catalysts to drive the stock. At the current market price of $0.008 on 8^th September 2020, we give an “Expensive” rating on the stock.

Gladiator Resources Limited 

Completion of Aircore Drill Programme: Gladiator Resources Limited (ASX: GLA) is primarily engaged in exploration activities, focused on under-explored mineral properties. The company recently responded to the ASX query regarding the increased volume and price of its stock. In its response, the company stated that it has not concealed any announcements that may impact the price and volume and will not be able to provide an explanation for the recent trading in its securities. On 1^st September 2020, the company announced the completion of the aircore drill programme at its Marymia gold project located in Western Australia, involving 31 holes for 1,922 meters. Grades reported from the drilling were low but confirmed the presence of gold mineralization. In August 2020, the company raised an amount of $407,500 via placement of 326 million shares at $0.00125 each. Proceeds will be used for working capital requirements and for progressing the Company’s Victorian Gold Projects. 

June Quarter Highlights: During the quarter, the company completed its planned site visit to Marymia for the proposed drilling campaign. GLA’s visit was earlier delayed due to COVID-19. Following ease of restrictions, the company also commenced work on its Rutherglen gold project. At the end of the quarter, the company had a cash balance of ~$212k. Cash used in operating activities during the quarter stood at $78k.

Operating Cash Flow (Source: Company Reports) 

What to Expect: After the completion of aircore drilling and renewal of the tenement, the company expects to complete future RC drilling as part of its planned exploration program at Marymia.

Key Risks: The risk of difficulty in settling its debts or meeting its obligations related to financial liabilities expose the business to liquidity risk. As discussed above, GLA site visits and drilling may get impacted if the pandemic continues to impact movement. 

Stock Recommendation: The stock of the company gave whopping returns of 233.33% and 400% in the last 3 months and 6 months, respectively. Currently, the stock is trading at par to its 52-week high of $0.006. During 1HFY20, the company had a current ratio of 0.22x, as compared to the industry median of 1.83x. On the technical analysis front, the stock has a resistance level of $0.006 and support level of $0.002. Considering the business updates, price movements, current trading levels, and key risks, we give an “Expensive” rating on the stock at the current market price of $0.006, up 20% on 8^th September 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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