3 Gold Stocks Too Hot To Touch – SPX, ADN, EAR

A Look at Recent IPO Stock
Introduction

Three penny gold stocks listed on ASX are Spectrum Metals Limited (ASX: SPX), Andromeda Metals Limited (ASX: ADN) and Echo Resources Limited (ASX: EAR). Let’s have a look at the recent update of these stocks. Gold Spot (XAU/USD) at the time of writing traded at US$1525.64 (August 30, 2019 18:57 (UTC+10)).

Spectrum Metals Limited (ASX: SPX)

Spectrum Metals Limited (ASX: SPX) is involved in the exploration and evaluation of mineral resources. The company recently announced the results of the SAM survey conducted in June 2019, where several new targets were identified. Important points included:

  • Several new targets have been identified in the ‘gap zone’ from analysis of lithology, resistivity, magnetics and structure.
  • Recent lithological mapping and geochemical characterisation studies were also incorporated into the SAM interpretation.
  • Targets generated from the SAM survey will be methodically tested over the coming months, with spectrum presently increasing the drilling capacity on site.
  • Results were received from Spectrum’s recently completed SAM survey.
  • Even beyond the boundary of the Penny West Shear Zone to the east and west, additional targets have also been defined.
  • The result is an increased understanding gained of the lithological and structural trends in the ‘Gap Zone’ between Penny North and Columbia-Magenta and over the entire SAM survey area.

Corporate Snapshot (Source: Company Reports)

June’19 Quarter Key Highlights: High-grade gold intersections released during the quarter at Penny North include 6m @ 47.4 g/t gold from 150m in hole SPWRC027; 11m @ 25.8 g/t gold from 131m in hole SPWRC029 and 3m @ 70.8g/t gold from hole SPWRC039. Discovery of a high?grade zone of 5m at 28.9 g/t gold from 203m in hole SPWRC006 below the southern end of the existing Penny West open pit, within mineralisation open to the south and down dip. Coarse gold panned from holes SPWRC056 and SPWRC060, the deepest hole drilled at Penny North as at the end of the period (Assays pending). Completion of Sub?Audio Magnetic (SAM) survey over a strike length of 4.5km of the Penny West Shear system. Completion of sighter metallurgical test work on selected composites from Penny North high?grade mineralisation that indicate exceptionally good total recoveries of up to 99.2% via a conventional crush?grind?gravity?leach processing route. Company’s cash balance at the end of the period was reported at $4.165 Mn.

On the stock information front

On August 30, SPX settled the day’s trade at $0.110 up 10%, with the market cap of ~$138.55 Mn. Its 52 weeks high and 52 weeks low stand at $0.125 and $0.004, respectively, with an annual average volume of 17,980,244. It has generated an absolute return of 1990.00% for the last one year, 1150.00% for the last six months, and 354.55% for the last three months.

Andromeda Metals Limited (ASX: ADN)

Andromeda Metals Limited (ASX: ADN) is involved in advancement of the Poochera Halloysite-Kaolin Project while seeking third party investment in its current portfolio of gold and copper exploration projects. In a recent update, potential customers for Direct Shipping Ore (DSO) halloysite?kaolin minerals received new non?binding offtake Letters of Intent (LOI) with product totalled at 405,000 tpa.

Additionally, exploration activities are currently being planned for Mount Hope, where a historic non?JORC 12.2Mt halloysite?kaolin resource has been reported (ASX announcement 24 October 2018 – ‘Exploration Licence Application for Mount Hope Halloysite?Kaolin’), and at Camel Lake where high purity halloysite surface samples have been collected.

An apparent shortage of consistent high?quality halloysite?kaolin for the Chinese ceramics industry has resulted in two of the world’s largest capacity processors signing offtake LOI’s for DSO from the Poochera Halloysite?Kaolin Project. Notably, this includes Longyan Kaolin who are globally recognised as a world?leading supplier of speciality halloysite?kaolin product from their operations in China. These latest offtake LOI’s are the result of a successful marketing initiative undertaken by Andromeda Metals (ASX: ADN, Andromeda, the Company) and will be incorporated into the Scoping Study to be released by the end of next month. The visit to China undertaken in June by Andromeda representatives has now secured substantial product offtake volumes and pricing for DSO and dry?processed product, in addition to the wet? processed offtake that was verified during visits to China in 2018, to support a mining and processing operation at Poochera.

The offtake agreements for all three product forms were signed on the expectation that the eventual commercially produced material would match the specifications of the samples provided. Andromeda is in the process of completing a Scoping Study to determine the optimum operational strategy for the Project. The significant logistical advantages of selling the dry?processed material (approximately 60% less waste) will be compared with the DSO option that would provide an immediate receipt of revenues and have minimal capital expenditure requirements, thus resulting in early positive cashflows generated by the operation. The potential option to capture the maximum product value by wet?processing in a secondary location also needs to be thoroughly investigated, as this has been proven to give a truly world?class, premium product.

Poochera Project (Source: Company Reports)

June’19 Quarter Key Highlights: Cash flows from operating activities for the period was reported at negative of $667K. Cash & Cash Equivalents at the end of the period was reported at $1,669K.

On the stock information front

On August 30, ADN settled the day’s trade at $0.055 up 3.774%, with the market cap of ~$71.85 Mn. Its 52 weeks high and 52 weeks low stand at $0.070 and $0.005, respectively, with an annual average volume of 20,755,924. It has generated an absolute return of 783.33% for the last one year, 960% for the last six months, and 341.67% for the last three months.

Echo Resources Limited (ASX: EAR)

Echo Resources Limited (ASX: EAR) is involved in the exploration and development of mineral resources in the Yandal Belt region of Western Australia. In a recent update to the market, Echo Resources Limited (ASX: EAR) and Northern Star Resources Limited (ASX: NST) pleasingly announced that they have signed a Bid Implementation Agreement, according to which Northern Star will offer to acquire all of the issued and outstanding ordinary shares in Echo Resources that it does not already own under the terms of an off-market takeover bid. Under the terms of the Offer, subject to satisfaction or waiver of certain conditions, each Echo Shareholder will receive a cash offer of A$0.33 for every Echo Share held, which represents a significant premium to Echo’s recent share prices, specifically:

? 39.4% to Echo’s Volume Weighted Average Price (“VWAP”) of A$0.237 on 19 August 2019 (Echo’s last trading day on ASX before Echo was placed in trading halt);

? 42.1% to Echo’s 10-day VWAP of A$0.232 up to and including 19 August 2019; ? 49.7% to Echo’s 20-day VWAP of A$0.220 up to and including 19 August 2019; and

? 80.3% to Echo’s 60-day VWAP of A$0.183 up to and including 19 August 2019.

Furthermore, the Offer Consideration represents a 154% premium to the A$0.130 a share issue price of Echo’s most recent capital raising completed on 6 May 2019. Northern Star is Echo’s largest Shareholder, with a relevant interest in approximately 21.7% of the issued and outstanding ordinary shares in Echo as at the date of this announcement. The Offer implies a fully diluted equity value for Echo of around A$242.6 million. In order to acquire the Echo Shares it does not already own, up to A$193.0 million will be payable by Northern Star. As on June 30, 2019, Northern Star had cash and equivalents of A$361.0 million and an undrawn debt facility of A$200.0 million, which is well in excess of the Offer Amount and related transaction expenses.

As per Echo Board Recommendations, directors of Echo independent of Northern Star, comprising Mr Victor Rajasooriar (Managing Director and Chief Executive Officer), Dr Alistair Cowden (Non-Executive Chairman), Mr Mark Hanlon (Non-Executive Director) and Mr Anthony McIntosh (Non-Executive Director) have carefully considered the terms and conditions of the Offer and, in consultation with Echo’s financial and legal advisers, have unanimously recommended that Echo Shareholders accept the Offer in the absence of a Superior Proposal. Echo’s Independent Directors have confirmed their present intention to, in the absence of a Superior Proposal, accept the Offer in  respect of all Echo Shares they own or control which represent approximately 1.7% of the issued and outstanding ordinary shares in Echo. Mr Alan Thom, who is a principal of Northern Star and nominee of Northern Star on the Echo Board, has abstained from making a recommendation in relation to the Offer.

Corporate Snapshot (Source: Company Reports)

June’19 Quarter Key Highlights: Company reported strong cash position of $17.3 million on June 30, 2019, to support upcoming exploration and growth activities.

On the stock information front

On August 30, EAR settled the day’s trade at $0.325 with the market cap of ~$224.61 Mn. Its 52 weeks high and 52 weeks low stand at $0.325 and $0.098, respectively, with an annual average volume of 6,907,681. It has generated an absolute return of 161.57% for the last one year, 54.76% for the last six months, and 140.74% for the last three months.


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