Poseidon Nickel Limited

POS Details

Signing of MOU: Poseidon Nickel Limited (ASX: POS) is engaged in the exploration, mining and production of nickel and other minerals. Recently, the company inked a Memorandum of Understanding (MoU) with Pure Battery Technologies (PBT) in order to study the merits of Poseidon supplying nickel concentrate to PBT’s proposed pCAM refinery plan, which is to be constructed in WA.

• PBT is aiming initial production of up to 50,000tpa of precursor Cathode Active Material (pCAM) from the refinery, which is likely to be expandable in future.
• As per MoU, the obligations of the parties are not binding or enforceable unless and until a Definitive Agreement has been entered.

FY21 Financial Summary:

• Improvement in Losses: For the year ended 30 June 2021, the company reported a total comprehensive loss of ~$10.93 million against $12.85 million in FY20. Loss per share for the year stood at -0.40 cents against -0.49 cents in FY20.
• Outflow from Operating Activities: Net cash outflow from the operating activities for the year amounted to ~$9.4 million as compared to ~$9.9 million in FY20.

Loss Highlights (Source: Analysis by Kalkine Group)

Key Risks:

• Commodity Price Risk: The company is exposed to the risk arising from any adverse movement in the global commodity prices.
• Environmental Risk: POS’s operational and financial health could be impacted by the change in environment, as the company may require suspending its operation for the time being.

Outlook:

• During FY22, the company is planning to deliver the maiden Golden Swan Resource and Reserve at Black Swan and targeting FID (Final Investment Decision) by May 2022.
• With respect to Mt Windarra, the company is planning a study option of trucking ore to Black Swan or Leinster.
• The company has scheduled to conduct the 2021 Annual General Meeting on 23^rd November 2021

Stock Recommendation: As on 30 June 2021, the company recorded cash & cash equivalents of ~$7.9 million against ~$45.23 million as on 30 June 2020. The company is trading above its 52-week low-high average of $0.055 - $0.160, respectively. The stock of POS gave a positive return of ~6.06% and 61.53% in the past three and six months, respectively. The stock of POS is trading at a price to book value multiple of 5.2x, against the industry median (Basic Materials) of 2.4x on a TTM basis, thus seems overvalued. The stock has support and resistance level of $0.100 and $0.130, respectively. Considering the valuation on a TTM basis, recent rally in the past few months, current trading levels, absence of revenues, and key risks associated with the business, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $0.115 as on 15 October 2021, 12:10 PM (GMT+10), Sydney, Eastern Australia.

POS Daily Technical Chart, Data Source: REFINITIV 

Note: The purple colour line in the chart depicts RSI (14-period).

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.

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