American Pacific Borates Limited

ABR Details

Focused to Become a Globally Significant Specialty Fertiliser Producer: American Pacific Borates Limited (ASX: ABR) is focused on advancing its 100% owned Fort Cady Borate Mine Project located in Southern California, USA. The market capitalisation of the company stood at $239.56 Mn as on 17^th September 2020. 

Encouraging Financial Metrics: During FY20, the company finished the placement of A$7.1 million (before costs) at $0.40 per share to institutional, professional, and sophisticated investors. In the month of March 2020, the company wrapped up all relevant engineering studies required for the enhanced Definitive Feasibility Study (DFS). The company enhanced the Fort Cady Borate Mine DFS, which was originally released on 17 December 2018, to incorporate process improvements. The enhanced DFS substantially increased the production of SOP. The improved DFS managed to deliver an exceptional financial metrics, which include an unlevered post tax NPV of US$1.97 billion, an unlevered post tax IRR of 39% and an EBITDA in the first full year of production of US$438 million. The company recorded a net loss after taxation attributable to the members of $5,191,489, as compared to $3,020,343 in FY19.

Key Financials (Source: Company Reports)

Planned Activities: The company continue to progress its construction activities with more equipment to arrive on site. The company added that these activities should place the business in a strong position to deliver on its target of the first production in Q3 CY21. In addition, the company would continue discussions with respect to a potential dual listing on the NYSE.

Stock Recommendation: In the past three and six months, the stock of ABR has moved up by 36.36% and 219.15%. Currently, the stock is inclined towards its 52-week high of $1.030.  The stock of ABR is trading at a price to book value multiple of 7.9x as compared to the industry median (Chemicals) of 2.5x on TTM basis. Thus, it seems that the stock is overvalued. On the technical analysis front, the stock of ABR has a support level of ~$0.728 and a resistance level of ~$0.864. Therefore, considering the current trading levels, valuation on TTM basis and price movement in past months, we give an “Expensive” rating on the stock at the current market price of $0.745 per share down by 0.667% on 17^th September 2020.  We suggest investors to wait for better entry levels.

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

Los Cerros Limited

LCL Details

Execution of RMB Agreement: Los Cerros Limited (ASX: LCL) is engaged in the mining exploration with a market capitalisation of ~$69.58 Mn as on 17^th September 2020.

Sale of Residual Assets: Recently, the company advised the market that it has implemented a binding agreement with FirstRand Investment Holdings (Pty) Ltd (RMB) for LCL to make a one-off payment of A$2.21 million for the extinguishment of an existing debt held by RMB. The RMB Agreement includes the reduction of potential future royalty payments from A$15 million to A$14 million on the Quinchia Project. The company added that the RMB agreement is subject to completion of the current capital raising of around $10 million through placement, which is likely to be on or around 22 September 2020.  In addition, the company also announced the sales of North Hill Ovalle Inc (NHO a 100% BVI subsidiary of LCL); Minera Hampton Chile Limitada (a 100% subsidiary of NHO); as well as the Loica and Vallecillo projects at the consideration of USD$100,000 to Chilean citizen.

Recovery of Extensive Gold-Bearing Structures: During 1H FY20, the company finished maiden Chuscal drill program, wherein, it depicted extensive higher-grade epithermal gold-bearing structures overprinting porphyry associated gold with a number of targets recognized as the potential porphyry sources. The company reached a $2 million strategic partnership agreement with Hongkong Ausino for the supply of IP survey and drilling services. The company raised $3.5 million of capital through a private placement in mid-July 2020, which was strongly overbid. In 1HFY20, the company reported a loss after income tax of $1,877,960, as compared to a loss of $1,707,161 in 1H FY19.

Key Financial Summary (Source: Company Reports)

What to Expect: The company anticipates the upcoming year to be positive for the business and aims to enhance shareholder’s value on the back of decent funding.

Stock Recommendation: The stock of LCL has moved up by 108.79% and 413.51% in the last one and three months, respectively. Resultantly, the stock is inclined towards its 52-high level of $0.220. The stock is trading at a price to book value multiple of 4.7x against the industry median (Metals & Mining) of 2.6x on TTM basis, and thus seems overvalued. On a technical front, the stock of ABR has a support level of ~$0.04 and a resistance level of ~$0.443. Thus, considering the valuation on TTM basis, price movement in the past months and current trading levels, we give an “Expensive” rating on the stock at the current market price of $0.170 per share, down by 10.526% on 17^th September 2020, owing to the release related to the sale of assets.

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

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