Stocks’ Details

Greenland Minerals Limited

Issue of Unlisted Options for Corporate Advisory Services: Greenland Minerals Limited (ASX: GGG) is engaged in the mining and development of minerals under its main project - Kvanefjeld Rare Earth. As on 14^th January 2021, the market capitalisation of the company stood at ~$381.63 million. On 11^th January 2021, the company issued 6 million unlisted options at an exercise price of $0.35 exercisable with an expiry date of 31 January 2023.

A Sneak-Peak at the September 2020 Results: In the September 2020 quarter, the company announced the outcome of technical reviews of the Environmental Study assessment which fulfills the mining license application requirements of the project. The project will now enter a statutory public consultation phase. The timing of this update coincides with the ongoing strengthened outlook of demand for rare earths, especially from Europe. GML foresees a rise in demand of critical raw materials from the newly established European Raw Materials Alliance (ERMA) which aims to ensure EU’s security, and industrial leadership position as a centre for rare earths. GML is already engaging and presenting Kvanefield Project to European industry groups for visibility. At the end of September 2020, the company had net cash outflows from operations at $0.363 million and cash in hand of $5.76 million.

Cash Flows from Operations (Source: Company Reports)

Approval for the Start of Public Consultation: GML has received approval for commencing statutory public hearing of the social and environmental impact of the company’s project in South Greenland.

Outlook: The long-term forecast for rare earths is robust, as per ADAMAS Intelligence. The company envisions its flagship project to provide a consistent supply of critical rare earths to industry groups in Europe and end-users worldwide. GML considers itself well-placed to enter collaborations with European industry groups. The project has an initial mine life of 37 years, representing only 10% of the broader resource base with scope to expand output and extend the project mine life.

Stock Recommendation: The stock of GGG gave a positive return of 86.67% in the past six months. The stock is trading above the 52-weeks’ average price band of $0.067-$0.345. The stock of GGG has a support level of ~$0.268 and a resistance level of ~$0.301. On a TTM basis, the stock of GGG is trading at a price to book value multiple of ~4x as compared to industry median (Metals & Mining) of ~3x. Considering the decent returns in the past six months, current trading levels, and TTM valuation, we suggest investors to wait for better entry levels and give an ‘Expensive’ rating on the stock at the current market price of $0.280, down by 1.755% on 14^th January 2021.

Vimy Resources Limited

Commencement of Trading on US-Based OTCQB Venture Market: Vimy Resources Limited (ASX: VMY) is engaged in the uranium exploration and development of uranium deposits. It holds interest through Mulga Rock project (MRP) and 79% interest in Alligator River project (ARP) in Western Australia. In a recent news update, VMY informed the investors of its addition to the list of companies eligible to trade on the US-based OTCQB venture market and will start trading in the US from 13^th January 2021. This platform will increase AMY’s reach to the investor pool, particularly US uranium investors and media associates in North America. As on 14^th January 2021, the market capitalisation of the company stood at ~$64.62 million.

September 2020 Results & Activities Highlights: During the quarter, VMY received improved economic estimates of higher returns, and reduced costs on its MR Project from the revised Definitive Feasibility Study (DFS) compared to the DFS results in January 2018. The revised projections include free cash flow of US$61 million a year, up by 22% on the previous estimate, estimated mine life of 15 years and yearly production at 3.5Mlbs of uranium. The company received approval for all 7 of its conditional environmental management plans (CEMPs) submitted, during the quarter. For Alligator River, VMY started exploration activities late due to COVID-19 but could not progress much without the consent of the traditional owners and availability of a drilling partner firm. It has conducted ore sorting trials and identified higher uranium concentrate grade from 1.2% to 2% of uranium with high recovery among other findings. The company’s management in the US has been closely engaging with the local nuclear utilities during the lockdown to gather traction from the market as the contracting cycle sets in. The company incurred $1.6 million net cash outgoings for the operations activities during Q1FY21 and had $5.5 million cash in hand as of 30 September 2020.

Cash Flow from Operations, Q1FY21 (Source: Company Reports)

Outlook: In September 2020, VMY has roped in KPMG to formalize the structure, and management of its investment process to find suitable partners for developing its key projects.  The company was also slated to apply for a works approval for licensed premises, a mining proposal and related mine closure plan in Q42020 for advancing on Mulga Rock project.

Stock Recommendation: The stock of VMY gave a positive return of 161.29% in the past three months and a positive return of 153.12% in the past six months. The stock is inclined towards its 52-weeks’ high level of $0.094. The stock of VMY has a support level of ~$0.065 and a resistance level of ~$0.097.  On TTM basis, the stock of VMY is trading at a price to book value multiple of ~7.8x as compared to industry average (energy) of ~5.9x, demonstrating that the stock might be overvalued. Considering the stock’s decent returns in the past few months, current trading levels, negative ROE, history of incurring losses during FY14-FY20, and valuation on TTM basis, we give an ‘Expensive’ rating on the stock at the current market price of $0.081, down by 2.401% on 14^th January 2021.

WA Kaolin Limited

Start of Stage 1 to Produce 200k Tonnes Per Year: WA Kaolin Limited (ASX: WAK) is a resources company, engaged in the mining and development of high-quality kaolinised granite. It operates Wickepin Kaolin (WK) project consisting of 30.5 million tonnes of ore reserve estimate (JORC-2012) of the premium kaolinised granite. As on 14^th January 2021, the market capitalisation of the company stood at ~$49.49 million. On 11^th December 2020, the company announced of entering stage 1 to commence production of 200k tpa for the Wickepin Kaolin project. Kaolin has completed the earthworks on the site and has contracted for a number of other activities to complete stage 1. In December 2020, the company also received its first commercial order from Japan for its new product CG-15.

Listing on ASX and Key Activities Reported: The company got listed on ASX on 26 November 2020 through an oversubscribed IPO of $22 million. In a list of key highlights, it reported holding the total mineral resource of 644.5 million tonnes. It has signed 551kt, 83% of the targeted 3-year produce of 664kt locked up through offtake agreements with customers in ANZ, Vietnam & China. The company has provided the following robust economic results due to the significant kaolin resource explored for the Wickepin project.

Definitive Feasibility Study (DFS) Highlights (Source: Company Reports)

Outlook: The company is considering supplying kaolin in premium paper and packaging industry and as feedstock for high purity alumina (HPA) market to widen markets for the product. WAK is also looking to commercialize the technology to produce metakaolin at its Kwinana pilot plant facility. It has planned to use the funds raised through IPO for staged expansion program and a new processing plant. It has estimated to raise production to 200k tonnes per year by the end of CY22.

Stock Recommendation: The stock is currently trading near to its 52-weeks’ low level of $0.16. The stock of WAK has a support level of ~$0.17 and a resistance level of ~$0.192. Considering the current trading levels, staged production plans for kaolin and purchase contract with customers for 3 years, associated risks with the probable uses of kaolinised granite, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.180, up by 2.857% on 14^th January 2021.

Caspin Resources Limited 

Conversion of Performance Rights (PR) into the Company Shares: Caspin Resources Limited (ASX: CPN) is a Perth-based company engaged in the exploration of minerals. It is formed from the demerger of its parent - Cassini Resources Limited upon execution of Demerger Scheme on 2^nd October 2020. It holds 100% interest in Mount Squires (MSP), a gold project and 80% interest in Yarawindah Brook (YBP), a nickel project. CPN also holds right to receive a contingent payment up to $20 million from OZ Minerals under 2 potential scenarios. As on 14^th January 2021, the market capitalisation of the company stood at ~$35.14 million. On 4^th January 2021, CPN announced vesting of 2.5 million Tranche 1 and 1.9 million Tranche 2 performance rights (PR) as per the vesting parameters laid out in prospectus dated 12^th October 2020.

A Sneak-Peak at the Project Status & Updated Financials: On 16^th December 2020, CPN updated that following the reassessment of the present data and new soil geochemistry results, it has found several new targets within the YBP. Given this, it has planned exploration at 3 targets at the YBP, including many airborne electromagnetic (AEM) conductor targets, Aries, and Yenart Prospect. For MSP, CPN has identified gold mineralisation at the Handpump Prospect and yet to explore most of the project by modern exploration. It aims to drill along the 50km structural corridor and take up targeted RC and diamond drilling based on the positive outcome of the drill. As per an investor presentation released in November 2020, the company reported $8 million cash at hand to fund its growth and projects. It has zero debt in its capital structure as of now.

Capital Structure Highlights, November 2020 (Source: Company Reports)

Outlook: As laid out in the prospectus released in November 2020, CPN aims to generate more pipeline of prospects for exploration on both its projects and is focused on acquiring new projects to create value for shareholders.

Stock Recommendation: The stock of CPN is currently trading higher than the average 52-week price band of $0.43-$0.73. The stock of CPN has a support level of ~$0.607 and a resistance level of ~$0.639. Considering the company’s limited operating history, no profit to date, associated risks on the long-tenure capital intensive projects, we give an ‘Avoid’ rating on the stock at the current market price of $0.620, up by 5.982% on 14^th January 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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