Growth in infrastructure advancement and automotive production are propelling progress in the metals and mining sector. Companies are spending more in R&D and resorting to technological advances aimed at different levels of business to boost productivity of operations, maintain growth and cut down on costs. The continuing transformation in green technologies, supported by the exponential development of innovative electric vehicles and investment in solar photovoltaic energy, are the key positives.
Australia is one of the world's leading producers and exporters of coal. Australia manufactured approximately 510 million tonnes (Mt) of coal in CY17-18. Consequently, around 380 Mt (75%) was exported as compared to 55% in CY90-91.
Here, we would be discussing three metals and mining stocks - Base Resources Limited (ASX: BSE), Hot Chili (ASX: HCH) and Grange Resources (ASX: GRR). Let us dig into details for each of these stocks.
Base Resources Limited (ASX: BSE)
Base Resources is engaged in the expansion, manufacture, production and sale of mineral sands which incorporates rutile, ilmenite and zircon.
The company recently issued the estimates of its initial Ranobe Ore Reserves, acquired in January 2018 and forms the base of its Toliara Project, in Madagascar. Base Resources is presently developing the Definitive Feasibility Study (DFS) which is expected to be finalized by the end of 2019.
On 27 November 2019, Base Resources reported steady production including 1.1% of rutile, 74% of ilmenite, 0.9% of Leucoxene and 5.9% of zircon. The Ranobe Ore Reserves projects thirty-three-year initial mine life, which is in line with the JORC Code forecast.
(Source: ASX, AIM and Media Release)
Predictions from PFS presentation
- Post-tax/pre-debt (real) NPV is expected to be USD 671 million, whereas, the company expects average revenue to cost ratio of the sector to be 3.06.
- Stage I, the company estimates a capex cost of USD 439 million. Further, it is expected to create a 13Mtpa mining processing operation.
- Stage 2 capex cost of USD 67 million is expected to expand the operation to 19Mtpa.
- The Operating cost of annual averages that excludes first and last partial operating years is projected to be US$77 million. After including 2% royalties the same is expected to be US$82 million.
- Non-operating cost is expected to be US$ 7 million. The figure includes external affairs, marketing, community, etc.
- The company expects EBITDA to be US$165 million, NPAT to be US$ 110 million and the free cash flow to be US$133 million.
In the FY19 results’ release, the company unveiled priorities for FY20-
- To progress the Toliara Project in the final phase which will include accomplishment of the Definitive Base Resources Feasibility Study.
- The company would enhance the performance of Kwale Operations on the South Dune orebody.
- BSE would finish mining term agreements.
- The company would pursue further Kwale mine life expansion ability.
The company expects Rutile production to range between 64,000 to 70,000 tonnes. Ilmenite production is expected to range between 315,000 to 350,000 tonnes. Zircon production is expected to range between 25,000 to 28,000 tonnes.
FY2019 Highlights (ended on 30 June 2019)
- Base Resources reported a revenue of $209.5 million, up 5% y-o-y, due to higher rutile and zircon prices.
- Rutile, zircon, Ilmenite constituted 47%, 25% and 28% of total sales revenue in FY19.
- EBITDA grew by 4% year to year to $113.5 million.
- Net profit of the company soared to $39.2 million, up 15% during the same period.
- Cash flow from operating activities came in at $96.6 million in FY2019 as compared to $117.1 million in FY2018.
- The company by the close of the FY 2019 had cash in hand standing at $39.2 million.
Source: Company’s Presentation
Base Resources has a market cap of $269.47 million with ~ 1.17 billion outstanding shares. The BSE stock was trading at $0.227 on 6 December 2019 (at AEST 1:01 PM).
Hot Chili Limited (ASX: HCH)
Australia’s copper maker, Hot Chili has an enhanced Chilean coastal an array of portfolio with its registered office located in Applecross. For this project, the company had aligned with Minera del Pacíico S.A, which is Chili’s largest iron ore miner.
In February 2019, HCH bought a 100 percent profit in Cortadera (copper-gold project), located close to its Productora and El Fuego copper projects. Further, in May this year, the company commenced the drilling campaign at Cortadera, which is positive.
On 26th November 2019, Hot Chili made an announcement pertaining to the Cortadera copper-gold porphyry discovery in Chile. The newest results of 2019 confirm that the Diamond drill hole had confirmed a large northern extension to the Main Porphyry at Cortadera.
The latest drilling intersection of 168m grading 0.4% copper and 0.1g/t gold from 44m down-hole (with 334.1m grading 0.5% copper and 0.2g/t gold) had been completed, and it is located on the southern flank of the 4th magnetic anomaly.
Furthermore, an outstanding Diamond drill hole was located at 970m depth.
On the same lines, the company announced on 11th November 2019 that the Diamond drill hole had ensured a large northern extension to the Main Porphyry at Cortadera. The CRP0020D Diamond drill hole recorded an exceptional 860m width and focused at testing large extensions to bulk high-grade copper and gold mineralization, which was being extended to a depth of 1,000m. The RC drill testing of the upper near surface had confirmed up-dip extensions to deeper sulphide mineralization.
The latest updates from a surface geochemistry program and current comprehensive mapping have given robust support to the company to bring-ahead first drilling across two huge evolution goals discovered close to Cortadera North and Cuerpo 3 North.
Hot Chili released information related to the third diamond drill results at Cortadera on 16th October 2019. The drill results at Cortadera also included a stand-out copper-gold porphyry drill results, which recorded 596m grading 0.5% copper and 0.2g/t gold from 328m down-hole depth (CRP0017D). Further, it also involved a new high-grade zone hosting 184m grading 0.7% copper and 0.3g/t gold from 430m down-hole depth across the main porphyry at Cortadera.
DD Drill Results at Cortadera (Source: Company’s Report)
The company expects to unveil final assay results for the third drill hole from 50m to 330m diamond hole CRP0018D in the coming days.
Issuing of Shares
On 15 November 2019, the company notified that it had issued 3,986,527 shares on conversion of 1,319 Convertible Notes. The price of the convertible note and accrued interest was $0.03333 per share as per, subject to regulatory approval.
On the same date, 11,111,112 under the tranche 2 were issued. The placement procedure took place to fund the Cortadera project, continuing EED etc.
On 5 November 2019, Hot Chili also issued 25,737,885 convertibles ordinary fully paid shares, quoted on ASX, on the conversion of 8,550 Convertible Notes.
Cash flow Details
For the year ended 30, June 2019, the company reported cash used from operating activities of $2.18 million and cash used from investing activities of $$3.18 million. Further, the company reported net cash flow from financing activities of $3.14 million. As of 30 June 2019, the company had cash and cash equivalents of $1.377 million.
HCH’s stock was trading at $0.037 per share (at AEST 1:14 PM) on 6th December 2019. In the time frame of one year, the stock provided with a positive return of 209.08%.
Grange Resources Limited (ASX: GRR)
Mining and exploration group, Grange Resources Limited is involved with the activities related to the iron ore and gold exploration and has presence in both Malaysian and Australian regions. Key mines and plant include Savage River iron ore mine and Port Latta pellet plant.
On 24th October 2019, the company issued its quarterly report for the period ended 30 September 2019. The company had started appropriate maintenance work on time and aimed at reducing the west wall, which offers the subsequent area of access to the Main Ore Zone in the near-term.
Highlights (Quarter ended on 30 September 2019)
- Cash and cash equivalents and liquid investments at the end of the period was reported at $156.08 Mn, as compared to $149.6 Mn for the June 2019 quarter.
- Trade receivables came in at $0.27 million as compared to $24.88 million for the June quarter, due to certain adjustments of provisional invoice price that reflected softer iron ore prices.
- The Board of Directors declared final dividend (fully franked) of 1 cent per share, with record date and payment date on September 11, 2019 and September 27, 2019, respectively.
In September quarter 2019, total concentrate produced accounted for 563,599 tonnes, while weight recovery reached 40.7%. The Pellet production which was 402kt in the June 2019 quarter grew to 550kt during the same period.
Shipping and Sales
There was a rise in the sale of Iron Ore Pellet from 326,616 dmt in the June quarter to 550,442 dmt in the September quarter. There was a major increase in the total iron ore product sales from 346,126 dmt in June 2019 to 570,590 dmt in September 2019. The average price of the product that was released during the quarter was US$103.06/t (FOB Port Latta), down from US$124.04/t (FOB Port Latta) as compared to the June 2019 quarter.
GRR’s stock was trading at flat $0.230 per share (at AEST 1:14 PM) on 6 December 2019. It has a market cap of $266.19 million and 1.16 billion outstanding shares. In the time frame of one year, the stock provided with a positive return of 21.05%.
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