Stocks’ Details

Sheffield Resources Limited

Signing of Joint Venture Agreement: Sheffield Resources Limited (ASX: SFX) is engaged in the exploration of minerals, mineral sand and base metals. The market capitalisation of the company stood at $160.91 million as on 20^th January 2021. Recently, the company has inked a joint venture agreement with YGH Australia Investment Pty Ltd for the Yansteel’s proposed investment of 130 million to acquire 50% of the Thunderbird Mineral Sands Project. Both the parties to the agreement have initiated the process to satisfy the remaining conditions precedent, including lender agreement. During the quarter ended 30^th September 2020, the company has wrapped a 9.9% placement to Yansteel for around A$12.9 million at A$0.376 per share. The company was focused on advancing the development options of the Thunderbird Mineral Sands Project during the quarter. The net cash outflow from operating and investing activities stood at $3.4 million and $395k, respectively.

Cash Flow (Source: Company Reports)

Outlook: Looking forward, the company would be focused on the development of its flagship project. In addition, SFX would also be focused on preserving cash reserves.

Stock Recommendation: As on 30^th September 2020, the cash and cash equivalents of the company stood at $15.81 million. The stock of SFX has surged 181.25% and 383.87% in the last six and nine months, respectively. As a result, the stock is trading towards its 52-week high of $0.480. In addition, we have considered 14-day RSI, and it was observed that the stock is currently in the overbought zone and may witness some correction, going forward. On a technical analysis front, the stock has a support level of ~$0.276 and a resistance level of ~$0.480. Hence, considering the returns on stocks, current trading levels, RSI levels and key risks with the business, we advise investors to book profit and give a “Sell” rating on the stock at the current market price of $0.440 per share, down by 5.377% on 20^th January 2021.

Argosy Minerals Limited

Completion of Export Shipment:  Argosy Minerals Limited (ASX: AGY) is engaged in the development of the Rincon Lithium Project. The market capitalisation of the company stood at $137.63 million as on 20^th January 2021. Recently, the company announced that it has successfully completed the export shipment of 20 metric tonnes of >99.5% high purity battery quality lithium carbonate product from its industrial- scale pilot plant operations at the Rincon Lithium Project. During Q4 FY20, the company executed 20 metric tonne high purity Li₂CO₃ product Sales Contract with Korean customer. During the same quarter, the company has also achieved progress on the pre-development works for ~2,000tpa modular lithium carbonate processing plant operation. The company recorded net cash outflow from operating activities of 362k and 360k from investing activities.

Cash Flow (Source: Company Reports)

Outlook: For the March 2021 quarter, the company will be focused on achieving progress toward constructing the ~2,000tpa high purity battery quality Li₂CO₃ processing plant and associated development works.

Stock Recommendation: The company closed December 2020 quarter with cash and cash equivalents of $2.8 million. In the last three and six months, the stock of AGY has soared 280% and 265.38%, respectively. As a result, the stock is inclined towards its 52-week high of $0.207. In addition, the stock is trading at a price to book value multiple of 5.9x against the industry median (Metals & Mining) of 3.2x on TTM basis. We have considered 14-day RSI, and it was observed that the stock is currently in the overbought zone and may witness some correction, going forward. On a technical analysis front, the stock has a support level of ~$0.0596 and a resistance level of ~$0.2554. Hence, considering the steep price movement, higher valuation, and RSI levels, we advise investors to book profit and give a “Sell” rating on the stock at the current market price of $0.205 per share, up by 51.851% on 20^th January 2021, owing to the completion of an export shipment.

Galileo Mining Ltd

Commencement of Exploration Program: Galileo Mining Ltd (ASX: GAL) is in the exploration of mineral resources. The market capitalisation of the company stood at $39.35 million as on 20^th January 2021. Recently, the company notified the market that it has commenced 2021 exploration field programs at its Fraser Range nickel project. As of now, Geophysical survey teams undertaking electro-magnetic (EM) programs with an objective to define conductive anomalies associated with nickel sulphide mineralisation for drill testing. During the quarter ended September 2020, the company has finished a diamond drilling campaign to test deeper nickel prospective targets under shallow cover. GAL also finished RC drilling campaign to test mineralisation and establish diamond drilling pre-collars. The net cash outflow from the operating activities stood at $37k.

Cash Flow from Operating Activities (Source: Company Reports)

Outlook: Looking forward, the company would continue its evaluation of mineral projects and undertake generative work in order to identify and acquire new resource projects and opportunities.

Stock Recommendation: The company seems to be well-financed to continue exploration programs with a cash balance of around $7.7 million as on 30^th September 2020. In the past few years, the company has recorded negative ROE and ROIC. The stock of GAL has moved up by 70.45% and 53.06% in the past one and three months, respectively. In addition, we have considered 14-day RSI, and it was observed that the stock is currently in the overbought zone and may witness some correction, going forward. On a technical analysis front, the stock has a support level of ~$0.184 and a resistance level of ~$0.431. Hence, considering the price movement in the past few months and RSI levels, we advise investors to book profit and give a “Sell” rating on the stock at the current market price of $0.390 per share, up by 41.818% on 20^th January 2021, owing to the commencement of exploration program at Fraser Range nickel project.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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