Quick Insights on Two Mining Stocks - Highland Gold Mining Limited & Kodal Minerals PLC

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Quick Insights on Two Mining Stocks - Highland Gold Mining Limited & Kodal Minerals PLC

 Quick Insights on Two Mining Stocks - Highland Gold Mining Limited & Kodal Minerals PLC

Summary

  • Highland Gold Mining reported revenue of USD 194.5 million in H1 FY20. The Company produced 124,294 ounces of gold and sold at an average price of USD 1,600 per ounces.
  • In FY2020, the Company expects to produce gold in the range of 290,000 ounces to 300,000 ounces.
  • Kodal Minerals signed a memorandum of understanding (MOU) with Sinohydro for the Bougouni Lithium Project. Sinohydro would review the development of the project.
  • Kodal Minerals filed mining application for Bougouni project in January 2020.

Highland Gold Mining Limited (LON: HGM) & Kodal Minerals PLC (LON: KOD) are two basic material stocks. Shares of HGM & KOD were down by close to 0.14 percent and 16.67 percent, respectively against the previous closing price (as on 2 September 2020, before the market close at 11:50 AM GMT+1).

Highland Gold Mining Limited (LON: HGM) - Announced sale of SVGGK LLC

Highland Gold Mining Limited is a Jersey-based gold producer. The Company has operations in Khabarovsk, Zabaikalsky and Chukotka regions of Russia. Highland Gold Mining has four mines under operation, three under development and three properties under exploration. The Company is included in the FTSE AIM 100 index.

H1 FY2020 results (ended 30 June 2020) as reported on 1 September 2020

(Source: Company website)

In H1 FY20, the Company produced 124,294 ounces of gold, which was down from 142,254 ounces of gold produced in H1 FY19. The total cash cost per ounce increased by 33 percent year on year to USD 717 per ounces in H1 FY20. All-in sustaining cost increased by 24.2 percent year on year to USD 966 per ounces. The average realized price for gold was USD 1,600 per ounces, which increased by 31.5 percent year on year from USD 1,217 per ounces. The higher gold prices in the reported period created headroom of USD 634 per ounces. Highland Gold Mining reported revenue of USD 194.5 million in H1 FY20, which increased by 11 percent year on year from USD 174.6 million a year ago. EBITDA was USD 96.3 million with an EBITDA margin of 50 percent in H1 FY20. The operating profit was USD 63.8 million in H1 FY20 that improved from USD 57.3 million in H1 FY19. Net profit during the reported period was USD 36.4 million. The net cash inflow from operations was USD 82.7 million, and capital expenditure was USD 59.1 million in H1 FY20. As on 30 June 2020, Highland Gold Mining had net debt of USD 280.4 million. On 2 June 2020, the Company announced the sale of SVGGK LLC, a wholly-owned subsidiary that owns Kayenmivaam license. The deal was for USD 15 million in addition to 2 percent royalty on gold production and sale of gold deposit above 500,000 ounces for 30 years.

Agreement with Fortiana Holdings Limited

On 31 July 2020, Highland Gold Mining entered an agreement with Fortiana Holdings Limited. As per the deal, Fortiana would purchase shares from Directors Eugene Shvidler and Valery Oyf and other key shareholders at a cash price of £3 per share. The shareholding for sale constitutes close to 40.06 percent of the total issued capital.

Share Price Performance Analysis

1-Year Chart as on September-2-2020, before the market close (Source: Refinitiv, Thomson Reuters)

Highland Gold Mining Limited's shares were trading at GBX 294.60 and were down by close to 0.14 percent against the previous closing price (as on 2 September 2020, before the market close at 11:50 AM GMT+1). HGM's 52-week High and Low were GBX 314.00 and GBX 150.00, respectively. Highland Gold Mining had a market capitalization of around £1.07 billion.

Business Outlook

In FY20, the Company expects to produce gold in the range of 290,000 ounces to 300,000 ounces. It has started the construction work at Baley ZIF-1 Tailings heap leach project, and the first gold production is expected in 2022. The project is expected to produce an average of 15,000 ounces of gold over 11 years period.

Kodal Minerals PLC (LON: KOD) - Entered a convertible loan agreement for USD 1.5 million in July 2020

Kodal Minerals PLC is a UK based company that is focused on lithium projects. The Company has an interest in Bougouni Lithium project in Southern Mali and the gold projects in Côte d'Ivoire and Mali. Kodal Minerals is included in the FTSE AIM All-Share index.

Development and Financing of Bougouni Lithium project

On 1 September 2020, Kodal Minerals announced that it had signed a memorandum of understanding with Sinohydro Corporation Limited. Sinohydro is engaged in engineering, construction and infrastructure development, and it is a subsidiary of Powerchina, a Chinese state-owned enterprise. As per the deal, Sinohydro would conduct a review of the proposed development of the Bougouni Lithium project on its own expense, and it would provide inputs related to procurement and civil engineering for the feasibility study of the project. It would assess the funding requirement for the project, and it would help in arranging the financing. Sinohydro would work closely with Suay Chin International Private Limited and Shandong Ruifu Lithium Industry who are other key stakeholders in the project. The Company expects that Shandong Ruifu would be the end-user of spodumene product that would be produced in the Bougouni project. Sinohydro has an exclusive right for six-months for review and suggestion on funding for Bougouni project.

FY2020 results (ended 31 March 2020) as reported on 22 July 2020

In FY20, the Company completed the feasibility study of Bougouni Lithium project, and it lodged the mining application in January 2020 with the Mali government. In April 2020, Kodal Minerals secured financing facility through a share subscription for £0.5 million and linked equity sharing agreement. The Company entered a convertible loan agreement for USD 1.5 million in July 2020. It received the first payment of USD 750,000 for the loan while second payment would be received on the date of mutual agreement. The loan is at 9.85 percent.

Share Price Performance Analysis

1-Year Chart as on September-2-2020, before the market close (Source: Refinitiv, Thomson Reuters)

Kodal Minerals PLC's shares were trading at GBX 0.075 and were down by close to 16.67 percent against the previous closing price (as on 2 September 2020, before the market close at 11:50 AM GMT+1). KOD's 52-week High and Low were GBX 0.112 and GBX 0.0191, respectively. Kodal Minerals had a market capitalization of around £10.00 million.

Business Outlook

The Company is hopeful over the deal agreed with Sinohydro for the Bougouni project. The technical assessment by Sinohydro would strengthen the outcomes of the current feasibility study performed by the Company. As per the feasibility study performed by Kodal Minerals, the Bougouni project has a mine life of 8.5 years, and it could have an average annual production of 220,000 tonnes of 6% spodumene concentrate. The capital requirement for the development of the project is expected to be around USD 117 million.

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