Two Basic Materials Stocks Trending on AIM: Xtract Resources & Red Rock Resources

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Two Basic Materials Stocks Trending on AIM: Xtract Resources & Red Rock Resources

 Two Basic Materials Stocks Trending on AIM: Xtract Resources & Red Rock Resources

Summary

  • The gold price crossed the mark of USD 2,000, and it was trading at USD 2,046.35 per ounce (as on 5 August 2020 before the market close at 12:05 PM GMT+1).
  • The Brent oil price was up by 3.58 per cent, and it was trading at USD 45.99 per barrel (as on 5 August 2020 before the market close at 12:05 PM GMT+1).
  • Xtract Resources reported a positive outcome of 3-D modelling at Eureka project.
  • Xtract Resources acquired the Bushranger Copper-Gold project in Australia.
  • Red Rock Resources received licenses for Blue Ribbon Project.
  • Red Rock Resources expects the demand for battery metals to bounceback soon.

We would review two basic materials stocks given the above market conditions- Xtract Resources PLC (LON: XTR) & Red Rock Resources PLC (LON: RRR). Based on 1-year performance XTR and RRR were up by about 30.43 percent and 4.12 percent, respectively (as on 5 August 2020 before the market close at 12:05 PM GMT+1). Let's skim the financial and operational updates of the two companies to understand the stock better.

Xtract Resources PLC – Partnering with a new Chinese group for mining contract at Manica

Xtract Resources PLC (LON: XTR) is a UK based mining company engaged in the exploration, development and production of projects in Australia and Africa. The Company has interests in projects such as Manica Gold, Manica Alluvial, Eureka Copper, Bushranger Copper-Gold. The Company is included in the FTSE AIM All-Share index.

Recent Events

  • On 23 July 2020, the Company appointed Alastair Ford as a non-executive director of the Company.
  • On 11 June 2020, the Company provided a positive outcome for the 3-D modelling at Eureka copper-gold mining. Addison Mining Services performed the independent 3-D modelling of the project that depicts the current pit at the project to have potential near-surface oxide resource. The ore body divides into trends of strong copper soil anomaly. The modelling suggests a shallow drill testing at the project before that a pitting programme would take place to check the mineralization. The 3-D modelling concludes the potential sulphide deposit along the strike and the oxide material close to the current pit. Eureka project is situated in The Republic of Zambia, and the deposit at the project is expected to include 1.58 percent Copper and 0.07 grammes per tonne gold.
  • On 1 June 2020, the Company acquired the entire share capital of ProsepectOre Ltd for £1.25 million through the issue of new ordinary shares of Xtract Resources. ProspectOre owned Bushranger Copper-Gold mine in New South Wales, Australia. The mine is expected to have 71Mt of 0.44 percent copper and 0.064 gramme per tonne gold as per JORC estimates.

Manica Alluvial Mining Production

(Source: Company Website)

Corporate Update as reported on 27 May 2020

In Q1 FY20, at Manica Alluvial Mining, the total contractor alluvial gold production was 467 ounces that was lower than 1,045 ounces produced in Q4 FY19, whereas the share of gold attributable to exploratory was 131 ounces. The activity was subdued in Q1 FY20 due to the delay in spare part delivery from China following the coronavirus impact. The value of explorator share of gold produced in Q1 FY20 was USD 208,396 lower than USD 438,119 in the previous quarter.

Share Price Performance Analysis

1-Year Chart as on August-5-2020, before the market close (Source: Refinitiv, Thomson Reuters)

Xtract Resources PLC's shares were trading at GBX 1.53 up by about 24.39 percent from the previous closing price (as on 5 August 2020 before the market close at 12:05 PM GMT+1). Stock 52-week High and Low were GBX 1.64 and GBX 0.45, respectively. The Company had a market capitalization of £5.60 million.

Business Outlook

The Company expects the acquisition of Bushranger gold-copper deposit to strengthen the portfolio of Xtract as it is expected to have 350,000 tonnes of copper with a tendency for the future discovery of deposits. Xtract plans to start a mining contract with a new Chinese company at Manica in line with the terms agreed with the previous contractors. The operations at Manica hard rock is steady, and it is expected to advance.

Red Rock Resources PLC (LON: RRR) - Jupiter Mines reviewing IPO of Yilgarn Iron Ore Projects

Red Rock Resources PLC is a UK based company that develops and explores mines, and it has an interest in gold, manganese, cobalt and copper. The Company has investments in projects including Migori Gold Project in Kenya, Copper-Cobalt JV in the Democratic Republic of Congo. Red Rock also has a stake in companies such as Elephant Oil Ltd and Jupiter Mines Limited. The Company is included on the FTSE Aim All-Share index.

Recent Events

  • On 16 July 2020, the Company's subsidiary Red Rock Australasia received the three licenses for the Blue Ribbon project out of the 11 license applications. The license is the project situated 5 km north of the Ballarat East mine. The project exploration gave some excellent results with close to 70,000 ounces of gold in the 19th The Company would focus on exploring the northern extension of the Ballarat West Goldfield.
  • On 8 July 2020, OreTeck Mining Solutions and Caracle Creek Chile SpA were appointed for the geological review and development of exploration licenses for the Victoria Goldfields, Australia. Jupiter Mines reported a review of initial public offering (IPO) of Central Yilgarn Iron Ore Project. Red Rock has a stake in Jupiter Mines that is valued at close to £2.41 million.

H1 FY2020 (ended 31 December 2019) as reported on 31 March 2020

(Source: Company website)

In H1 FY20, the profit before tax from the continuing operation was £337,000, which was a loss of £283,000 in H1 FY19. The diluted earnings per share were 0.047 pence. As on 31 December 2019, the Company had total assets of £11.4 million and cash of £0.1 million. The Company refrained from writing back any impaired charges of the total £5.28 million that the Company charged in 2015 related to the Kenyan assets. In February 2020, the Company reported the identification of two open-ended areas in Copperbelt in the Democratic Republic of Congo that has characteristic of copper and cobalt. In March 2020, the Company issued new ordinary shares to the vendors. The Company held 17.02 million shares in Jupiter Mines Limited and following the promising performance by Tshipi manganese mine of Jupiter it declared a dividend of ZAR265 million. Jupiter Mines Limited owns 49.9 percent Tshipi Borwa manganese mine in South Africa.

Share Price Performance Analysis

1-Year Chart as on August-5-2020, before the market close (Source: Refinitiv, Thomson Reuters)

Red Rock Resources PLC's shares were trading at GBX 0.52 up by about 10.77 percent from the previous closing price (as on 5 August 2020 before the market close at 12:05 PM GMT+1). Stock 52-week High and Low were GBX 0.57 and GBX 0.11, respectively. The Company had a market capitalization of £3.27 million.

Business Outlook

The Company is working for the renewal of exploration license for the Luanshimba copper-cobalt mine in the Democratic Republic of Congo and restoration of licenses in Kenyan mines. The Company highlights the pandemic has impacted the market for all metals in the short-term, excluding gold. The economies are investing money to cope up with the pandemic, and the Red Rock expects that the demand for battery metals would bounceback soon.

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