Greenland Minerals Limited

GGG Details

GGG Reveals Data of Kvanefjeld Project: Greenland Minerals Limited (ASX: GGG) is an exploration and development company involved in the expansion of high-quality mineral projects across Greenland. GGG’s leading project is the Kvanefjeld Rare Earth project (rare earth elements, uranium, zinc, and fluorspar). In a recent update, the company revealed the economic and environmental consequences of the production of Kvanefjeld rare earth project. Kvanefjeld Project has a smaller footprint and lower impacts while producing higher rare earth. The Project will produce commercially substantial quantities of uranium oxide, zinc concentrate, and fluorspar. As per the company’s update, uranium sales are estimated to be US$45Mpa, which represents a significant gross margin contributor. Zinc concentrate from the project will be ~6,000 tpa to generate ~US$6Mpa, after allowing for treatment charges. The project on the other hand will produce 12,500tpa of high grade Metspar. Fluorspar will add ~US$4Mpa of revenue. ther Recent Update: In another update, the company announced that it has appointed Mr Jørn Skov Nielsen as Executive General Manager.

March Quarter 2020 Highlights: The company remained on track to focus on the completion of additional technical studies that were commenced following EIA reviews in 2019. The company has been active in taking a supportive and cooperative position to help companies operating in their mineral resources sector through the COVID19 crisis, with minimal disruption. The company reported its quarterly cash flow activities for the period ended 31 March 2020, wherein it posted net cash used in operating activities at $157K and cash balance at the end of the quarter at $7.774 million.

FY19 Financial Highlights: GGG reported its FY19 revenue at ~$64k against $133k in FY18 and a net loss of $2.851 million in FY19. The company’s expenditure in ‘Director and Employee Benefits’ stood at $1.370 million, professional fees at $0.624 million, whereas other expenses stood at $0.778 million. At the end of the period, the company reported a cash balance of $8.599 million, plant property and equipment at $0.785 million and capitalised exploration and evaluation expenditure at $85.886 million.

Notably, the outcomes of 2016 Kvanefjeld Feasibility Studies were finalised during Q2FY19, wherein it mentioned a 40% reduction in capital cost at US$505M and a decline in operating costs by 40%, resulting in unit costs of less than US$4/kg of REO (Rare Earth Oxide). The company also updated about its operating performance and mentioned that reagent consumption has reduced followed by decline in power requirements.

FY19 Financial Snapshot (Source: Company Reports) 

What to Expect: Kvanefjeld provides an excellent opportunity to introduce a large, stable supplier at prices that are readily sustainable to end users. The company has continued to position the Kvanefjeld Project to be developed as a worldwide and long-life producer of rare earth products. To boost demand, the company is taking necessary steps to closely work with the Greenland Government to ensure that the project is successfully developed, thereby adding value to its shareholders. Uranium forms an important part of the global base load energy supply, with demand set to grow in the coming years as developing nations expand their energy capacity.

Risks: On the flip side, the growth in rare earth demand has been limited by end user concerns over pricing instability and surety of supply. The company is also susceptible to certain risks such as credit risk, liquidity risk, and market risk, which includes currency risk, interest rate risk, etc. Further, the company is susceptible to fluctuations based on changes in global economic conditions and end-use markets.

Stock recommendation: The stock of GGG closed at $0.175 on 20 July 2020. The stock has a market capitalization of ~$184.6 million with ~1.19 billion of shares outstanding. 52-week trading range for the stock stands at $0.067 - $0.182. On 20 July 2020, the stock made a new 52-week high of $0.182 and is trading close to it. GGG has given healthy returns of 58.16% and 24% in the last 3 months and 6 months, respectively. The company has been progressing well with the operation of the Kvanefjeld Project. In 2019, debt to equity multiple of the company stood at 0.01x, as compared to the industry median of 0.11x. On the valuation front, the stock is trading at a P/BV multiple of 2x as compared to the industry median (basic materials) of 1.9x on TTM (Trailing Twelve Months) basis and thus, seems overvalued. Considering the current trading levels, attractive returns in the past three months, and outcome of economic impacts given the COVID19 pandemic scenario, we suggest investors to book profit on the stock and recommend a ‘Sell’ rating at the current market price of $0.175, up by 12.903% as on 20 July 2020.

GGG Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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