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Summary
- The Office for National Statistics released the data according to which the UK GDP grew by 1.8 percent in May 2020 after declining by 20.3 percent in April 2020.
- The British government planning to ban Huawei from the UK's 5G network by asking the telecom companies to remove Huawei's equipment by 2027.
- Zanaga Iron Ore Company reached an agreement with Shard Merchant Capital Ltd (SMC); SMC would subscribe 21 million new shares of Zanaga.
- Zanaga Iron Ore Company completed a floating port feasibility study that outlines improvement in NPV and IRR and reduced costs at stage-1 of Zanaga project.
- Haydale signed a limited distributor agreement with Dalian Yibang Technology for sale of Haydale's graphene-enhanced masterbatch in China and Taiwan.
- Haydale closed the production facility in Taiwan and moved the manufacturing to Ammanford and Thailand.
Given the above market conditions, we will review two basic materials stocks - Zanaga Iron Ore Company Limited (LON:ZIOC) & Haydale Graphene Industries PLC (LON:HAYD). The shares of both ZIOC and HAYD were up by 7.96 percent and 14.38 percent, respectively, against the previous day closing (as on 14 July 2020, before the market close at 2.10 PM GMT+1). Let's walk through their financial and operational updates to understand the stock better.
Zanaga Iron Ore Company Limited (LON:ZIOC) – Improvement in the phased development of project identified
Zanaga Iron Ore Company Limited is domiciled in the British Virgin Islands and engaged in the development and exploration of iron ore. The Company has 49 percent stake in Zanaga Iron Ore Project situated in the Republic of Congo; Glencore PLC owns the remaining stake. The Zanaga project has a mineral ore capacity of 6.9 billion tonnes and ore reserve of 2.1 billion tonnes.
FY2019 Annual results (ended 31 December 2019) as reported on 1 July 2020
In FY19, the infrastructure solutions for 30Mtpa Zanaga Iron Ore Project has been identified. The project is staged in two phases: The 12Mtpa project as Stage 1 whereas, 18Mtpa project for stage two. In May 2020, the Company completed the floating offshore port study. The study outlined USD 184 million capital cost reduction related to phase-1 12Mtpa project and improved NPV and IRR of the project from a floating port facility at Zanaga project. ZIOC and Glencore decided FY20 budget of USD 1.2 million. ZIOC has already contributed USD 0.2 million of the total committed budget of USD 0.4 million. As on 31 December 2019, ZIOC had a net asset value of USD 38.1 million, of which USD 37.4 million is related to investment in the JV Jumelles and USD 0.7 million of net cash balance. On 25 June 2020, the Company reached a subscription agreement with Shard Merchant Capital Ltd (SMC). Under the agreement, SMC would subscribe 21 million new shares of Zanaga Iron Ore Company Limited in three tranches of up to 7 million each.
Zanaga Ore Reserve Report
(Source: Company Website)
Share Price Performance
1-Year Chart as on July-14-2020, before the market close (Source: EODHD/Others, Thomson Reuters)
Zanaga Iron Ore Company Limited 's shares were up by 0.16 percent against the previous day closing and trading at GBX 6.39 (as on 14 July 2020, before the market close at 2.20 PM GMT+1). Stock 52-week High and Low were GBX 15.25 and GBX 3.00, respectively. The Company had a market capitalization of £18.80 million.
Business Outlook
Zanaga would focus on near-term and long-term synergy with the existing partners. The Company would focus on optimizing the development cost for the 30 Mtpa project in the H2 FY20 with the cooperation of EPC contractors and infrastructure companies. ZIOC is discussing with the management committee to re-negotiate contract agreement to preserve cash; if the decision is finalized, it would be effective from Q4 2020.
Haydale Graphene Industries PLC (LON:HAYD) – Subdued demand in the aerospace sector weighed down on the Company's performance
Haydale Graphene Industries PLC is a UK based Company, which is engaged in the development of advanced materials. The Company provides products, such as Silicon Carbide Whiskers, Inks and Nanomaterials. The products offered by the Company have extensive usage in Aerospace, Marine, Automotive and Medical sector. Haydale is included in the FTSE AIM All-Share Index.
H1 FY2020 results (ended 31 December 2020) as reported on 27 February 2020
In H1 FY20, the Company generated revenue of £1.35 million, which declined by 17 percent year on year. The adjusted operating loss narrowed from £2.7 million in H1 FY19 to £2.1 million in H1 FY20. In November 2019, the Company raised £0.45 million through an issue of 22.5 million new shares at £0.02 per share. The sales of silicon carbide were low in the period due to subdued demand in the US aerospace sector; the sales in the other geographic regions were below the Company's expectation. However, it was better when compared to the same period last year.
The Company closed the manufacturing facility in Taiwan, which was incurring losses due to repetitive orders but no new orders. The manufacturing facility has been moved to Ammanford and APAC Knowledge Centre in Bangkok. On 7 April 2020, the Company signed a deal with Dalian Yibang Technology (DLYB), where DLYB would have exclusive rights in Taiwan and China to market graphene-enhanced masterbatch for an initial period of four years. The Company would provide consulting services in addition to the supply of masterbatch; the contract will begin commercial phase from 2021, and the minimum revenue threshold is set at USD 300,000 for the year.
Financial Performance in H1 FY2020
(Source: Company Website)
Share Price Performance
1-Year Chart as on July-14-2020, before the market close (Source: EODHD/Others, Thomson Reuters)
HAYD’s shares were up by 15.22 percent against the previous day closing and trading at GBX 3.69 (as on 14 July 2020, before the market close at 3.30 PM GMT+1). Stock 52-week High and Low were GBX 5.20 and GBX 0.80, respectively. The Company had a market capitalization of £10.89 million.
Business Outlook
In the present scenario, the Company expects to fall short of the expectation. The Company witnessed a low demand in many markets with a continued slowdown in the aviation sector. The suspension of production at aeroplane manufacturing facilities has compounded the wrong situation. The long-term expectation of the Company remains unchanged due to confidence over proprietary technology.
