Gold Road Resources Limited

GOR Details

Insights of Q1FY22: Gold Road Resources Limited (ASX: GOR) is engaged in mine operations through a joint venture, sale of gold and mineral exploration. During the March 2022 quarter, the company recorded rising production and sales. It experienced no material impact on operations from COVID-19 during the quarter. Subsequent to the end of the quarter, GOR announced a takeover offer for DGO Gold of 2.16 Gold Road shares for one DGO share, which implies an offer price of $3.55 per share, and an equity value of approximately A$308 million. The offer opened on 8 April 2022, and DGO Directors unanimously recommended shareholders to accept the offer in the absence of a superior offer.

Financial Summary (Source: Analysis by Kalkine Group)

Key Risks: GOR’s performance could be affected by the adverse movement in the prices of gold as it generates a major portion of revenue from the sale of gold. In addition, it is exposed to risks arising from the extreme change in the climate.

Outlook: For FY22, the company expects gold production in the range of 300,000 – 340,000 ounces at an attributable AISC of between A$1,270 – A$1,470 per ounce.

Valuation Methodology: P/E 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 GOR has a 52-week low-high range of $1.135- $1.830, respectively. The stock has been corrected by ~5.24% in the past one month. The stock has been valued using a P/E multiple-based illustrative relative valuation method and arrived at a target price of low double-digit (in percentage terms). The company might trade at a slight discount to its peers’ average P/E multiple, considering the COVID-19 Uncertainties and rising cost pressure, etc. For the purpose of valuation, a few peers like Regis Resources Ltd (ASX: RRL), Dacian Gold Ltd (ASX: DCN), OceanaGold Corp (ASX: OGC), and others have been considered. Considering the expected upside in valuation, rising production, growing cash position, decent outlook, current trading levels, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the closing price of $1.545, down by ~0.961% as on 27 April 2022.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

GOR Daily Technical Chart, Data Source: REFINITIV 

Poseidon Nickel Limited

POS Details

Update on Silver Resources: Poseidon Nickel Limited (ASX: POS) is engaged in the exploration and development of nickel sulphide. Recently, the company notified the market with an updated Mineral Resource Estimate (MRE) for the Silver Swan deposit, which now stands at 130,000t @ 9.6% Ni for 12,400t Ni at a 4.5% Ni COG Silver Swan. The updated resources support the significant increase in high grade indicated resource base.

1HFY22 Highlights: At the end of 1HFY22, the company had a working capital surplus of $17,169,000, which includes a provision for environmental rehabilitation of $3,500,000.

Financial Summary (Source: Analysis by Kalkine Group)

Key Risks: The adverse movements in the prices of nickel could affect the company’s performance. In addition, POS is exposed to risks arising from the extreme change in the climate, regulatory uncertainties, etc.

Outlook:  The company is optimistic about first production at Black Swan in 2023 and is planning to carry out FID by September 2022 and commissioning of the mill during Q1 2023.

Valuation Methodology: P/E 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 POS is currently trading near its 52-week low level of $0.059, offering a decent opportunity for accumulation. The stock has been corrected by ~8.51% in the past one month. The stock has been valued using a P/E Multiple based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight premium to its peers, considering the progress on decent resource estimates and rising cash position, etc.  For the purpose of valuation, peers such as South32 Ltd (ASX: S32), IGO Ltd (ASX: IGO), BHP Group Ltd (ASX: BHP), and others have been considered. Considering the expected upside in valuation, updated silver resources, capital raising, current trading levels, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the closing price of $0.085, down by ~1.162% as on 27 April 2022.

Markets are currently trading in a highly volatile zone due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

POS 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 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 analysis has been achieved and 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 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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