Arafura Resources Limited

ARU Details

Completion of Placement: Arafura Resources Limited (ASX: ARU) is engaged in mineral exploration and development. The market capitalisation of the company stood at ~$116.77 Mn as on 13^th October 2020. In a recent presentation, the company stated that it is seeking to raise US$726 million in order to match the CAPEX requirements for the Nolans project. The company added that the potential sources of funding might comprise equity, debt, JV and/or project sell down with a strategic investor. In the month of July 2020, the company raised $23.2 million (before costs) via a fully underwritten non-renounceable entitlement offer. In addition, the company also raised $7 million (before costs) via a share placement. The company utilised funds to progress execution readiness activities, early engineering works and interrelated programs to secure offtake agreements, complete negotiations for the mining agreement with Native Title holders, and general working capital. During FY20, the company reported loss amounting to $4,810,958 as compared to $5,854,157 in FY19. This improvement in losses was due to completion of most of the 7-phase pilot program in FY19.

Key Financials (Source: Company Reports)

Future Focus: The focus of the company revolves around prioritising project work streams against cash conservation priorities, considering COVID-19 and accelerating engagement with financiers & financial advisors for project financing. The company has scheduled to conduct its 2020 Annual Shareholders Meeting on 22^nd October 2020.

Stock Recommendation: At the end of FY20, the cash and cash equivalents of the company stood at $22,771,113 as compared to $5,397,774 at the end of FY19. The 52-week low-high range for the stock stands at $0.046 - $0.110. In the past three and six months, the stock of ARU has moved up by 80% and 62.29%, respectively. On the technical analysis front, the stock price of ARU has a support level of ~$0.097 and a resistance level of ~$0.11. Thus, in light of steep movement in the stock within the past months, and recent capital raising, we are of the view that most of the positive factors have been discounted and, hence, we advise investors to book profit on the stock and recommend a ‘Sell’ rating at the current market price of $0.099 per share, down by 1.001% on 13^th October 2020.

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

Newpeak Metals Limited

NPM Details

Drilling Program at Cachi Gold Project: Newpeak Metals Limited (ASX: NPM) is a mineral resource company which is focused on tier 1 Gold exploration projects. The market capitalisation of the company stood at ~$13.09 Mn as on 13^th October 2020. Recently, the company notified about its plan for commencing drilling program for the Cachi Gold Project in Santa Cruz Province, Argentina at end of 2020. NPM added that the program would test two of the main mineralised targets Vetas Cachi and Vetas NW. Despite the disruptions created by the COVID-19 pandemic, the company made important strategic changes to its business plan, with initial positive outcomes in FY20. For the year ended 30^th June 2020, the company reported loss amounting to $9,987,762 as compared to $3,418,469 in FY19. In the month of July 2020, the company finished a private placement of $675,000.

Key Financials (Source: Company Reports)

Outlook: Going forward, the company is intending to pursue opportunities to complement the suite of Argentine Gold Projects.

Stock Recommendation: As on 30^th June 2020, the cash balance of the company stood at $635,941 against $230,308 as on 30^th June 2019. In the past three months, the stock of NPM has moved up by 50%. In addition, the stock is trading at a price to book value multiple of 6.1x as compared to the industry median (Metals & Mining) of 2.7x on TTM basis.  Hence, considering the past movement in the stock, higher valuation (on TTM basis), we are of the view that most of the positive factors have been discounted and, hence, we suggest investors to book profit on the stock and give a ‘Sell’ rating at the current market price of $0.003 per share with no change on 13^th October 2020.

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

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