Stavely Minerals Limited

SVY Details

Robust Assay Results Confirm Further Drilling at the Cayley Lode: Stavely Minerals Limited (ASX: SVY) is a miner, explorer, and operator of wholly-owned projects - Stavely and Ararat. As of 5 May 2021, the market capitalisation of the company stood at ~$161.79 million. On 4 May 2021, SVY announced significant results from its ongoing drilling activity at the Cayley Lode discovery at the Stavely Au-Cu project. Based on results received, it has planned to drill the deposit at SMD135 hole further to the northwest within the discovery zone. The results returned two key intercepts at the SMD135 drill hole (the Copper Lode Splay and another deeper intercept) with gold-copper-silver mineralisation.

March Quarter (Q3FY21) Result Highlights: The company reported $12,000 of cash receipts from its customers during Q3FY21. SVY incurred an exploration and evaluation expenditure of $5.83 million for the quarter. In Q3FY21, SVY undertook drilling activity at the Cayley Lode discovery at Thursday’s Gossan prospect at the Stavely Project. The assay results returned in drill holes SMD121, SMD127 and SMD134 confirmed the high-grade Au-Cu-Ag mineralisation to the northwest.

At the Mt Ararat project, SVY completed diamond drilling of SADD011 and SADD0012 holes to a certain depth to assess the existing resource (down-dip) potential. It is now progressing with the sampling and assaying of the diamond core at the close of Q3FY21. During Q3FY21, SVY announced the divestment in its non-core Ravenswood Project in Queensland to Sunshine Gold Limited (ASX: SHN) to focus on the development of the Stavley project. It held a cash balance of $20.30 million as of 31 March 2021.

Cash Flow Q3FY21, Highlights (Source: Company Reports)

Key Risks: The company faces Stage 3 restrictions in Victoria at the SCG project area. It is exposed to the risk of paddocks disturbance during the wet season, reduced drill rigs at the site, and the risk of JORC resource mineral estimation.

Outlook: During Q4FY21, SVY plans to continue with the resource drill-out at the Cayley Lode at Thursday’s Gossan prospect. The company has also prepared an auger soil sampling program over the broader Thursday’s Gossan prospect and plans to complete it in Q4FY21. At the Ararat Project, it is expected to continue the diamond drilling to test the down-dip potential of the present resource at the project. At the Yarram Park Project, SVY has planned further reconnaissance air core drilling in Q4FY21.

Stock Recommendation: The stock of SVY gave a negative return of 22.07% in the past six months and a positive return of 48.14% in the past year. The stock is currently trading lower than the 52-weeks’ price level of $0.380-$0.960. The stock of SVY has a support level of ~$0.529 and a resistance level of ~$0.656. Considering the low trading levels, the outstanding assay results at the north-west extension at the Cayley Lode, further drilling planned in Q4FY21 at the key projects, valuation and the related risks of pandemic restrictions and potential resource estimation, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.600, down by 3.226% on 5 May 2021.

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

Emmerson Resources Limited

ERM Details

A Look at the Q3FY21 Results: Emmerson Resources Limited (ASX: ERM) is a copper and gold exploration firm currently accelerating exploration spanning its five early-stage gold-copper projects in New South Wales (NSW). As of 5 May 2021, the market capitalisation of the company stood at ~$33.88 million. For Q3FY21, ERM reported cash outgoings of $367k from operating activities as of 31 March 2021. It incurred $978K of exploration expenditure for Q3FY21.

ERM had signed a strategic alliance with Tennant Consolidated Mining Group (TCMG) in the Tennant Creek Mineral Field (TCMF) in November 2020. In March 2021, ERM completed the $2 million placement of 15.34 million shares and options at $0.13 per share and $0.20 respectively to TCMG as agreed for the alliance. It announced satisfactory completion of the equity investment in TCMG and the execution of the Exploration Earn-In and Joint Venture (EEJV) agreements for a 75% Earn-In as the fulfilling conditions for the alliance. In Q3FY21, ERM announced the high-grade copper and gold intersection returned from the assay results of the diamond drill holes (MTDD009 and MTDD010) at the Mauretania project located in the TCMF.

ERM has submitted documentation on behalf of the Marnturla Aboriginal Corporation (MAC), the land custodians for the title of Jasper Hills, Hermitage and Golden Slipper mineral. It awaits the formal variation approval from the authorities to commence the drilling on the project. ERM held a cash reserve of $5.57 million as of 31 March 2021.

Q3FY21 Cash Flow Highlights (Source: Company Reports)

Key Risks: The company is exposed to delays in exploration activity (at the Tennant Creek project) due to the pandemic restrictions and suspension due to the arrival of the wet season. It bears the risk of achieving partnership synergies or resolve earn-in interest issues on its joint venture projects.

Outlook: The company planned to resume the drill program at its Mauretania target at the Tennant Creek project in May 2021. It is also preparing for drilling across multiple targets at TCMF in Q4FY21. It will commence pre-development drilling and baseline studies at the Chariot and Mauretania targets. It plans to begin drilling activity at Jasper Hills post the receipt of variation approval. At its Kiola gold-copper project in NSW, ERM intends to finalise the 3D models and drill targets.

Stock Recommendation: The stock of ERM gave a negative return of 12.65% in the past three months and a negative return of 34.28% in the past six months. The stock is currently trading lower than the 52-weeks’ average price band of $0.058-$0.125. The stock of ERM has a support level of ~$0.0601 and a resistance level of ~$0.078. On a TTM basis, the stock of ERM is trading at a price to book value multiple of 1.6x lower than the industry (Metals & Mining) median of 2.8x, thus seems undervalued. Considering the low trading levels, decent cash position, drilling programs planned across projects in the next quarter, debt-free balance sheet as per 1HFY21 results, valuation on a TTM basis, and related risks of exploration, pandemic environment, and operating joint venture projects, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.069, up by 1.470% on 5 May 2021.

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

Note: 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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