Fundamental Insight About Two Mining Stocks: Greatland Gold PLC And Base Resources Ltd

Greatland Gold PLC

Greatland Gold Plc (GGP) is a mining company focusing mainly on the exploration of gold in Western Australia and Tasmania. The company had divided its operations based on different geographies in which it operates, which includes Australia and the UK. The company has been working on 5 minerals projects, which include Warrentinna project, Firetower project, Bromus project, Ernest Giles project and Havieron project.

Recent News

On 25th July 2019, the company published the first results from Newcrest’s drilling campaign at the company’s Havieron licence situated in Western Australia’s Paterson area. This result confirmed the wider mineralised scopes defined by the previous drilling, spread across the depth of observed mineralisation, and high-grade gold-copper mineralisation at Havieron. Two rigs were active with one existing drill hole protracted and two new holes completed for a total consideration of 2800 meter of drilling.

In HAD006, Newcrest enhanced the company’s hole to 1216 metre from 838 metre, and successfully recognised high-grade mineralisation at depth, through mineralisation the company observed across 700 million in vertical extent. In HAD011, the company was able to enlarge the mineralised breccia and concluded that with depth, copper grades too were improving with local values up to 2.3 per cent Cu. However, in HAD010, the company passed across the cover zone but could not find any significant mineralised zone.

On 15th July 2019, Greatland Gold Plc announced the identification of exploration targets at East of Paterson Range after an aeromagnetic survey conducted over the licenced land. The Paterson Range East is wholly owned by Greatland and is near Company’s Havieron prospect and covers an area of 224 square kilometres. The aeromagnetic data indicates several targets with Havieron like a magnetic signature. The company will commence surface geochemistry and ground gravity by August.

Financial Highlights (H1 FY2019, £)

(Source: Interim Reports, Company Website)

For the first half of the financial year 2019, the company remained in the development stage and didn’t generate any revenue, depending on the cash balances for its operating expenses. The Operating Loss stood at £1,460,758 for H1 FY2019 versus a loss of £718,096 in H1 FY2018. In the H1 of the FY2019, the company’s pre-tax loss and Loss for the period stood at £1,458,171 versus a loss of £716,988 in H1 FY2018. The company’s basic loss per share stood at 0.05 pence in H1 FY2019 versus a loss per share of 0.03 pence in H1 FY2018. The company’s cash and cash equivalents were £3,969,359 for H1 FY2019 versus £4,499,411 in H1 FY2018.

The company for the first half of the financial year 2019 has not generated any revenue, and its profitability is in the negative zone. A mixed movement in the commodity prices may negatively impact the economic viability and profitability of the company’s projects. The gold prices in the international market had improved, but other commodity prices had weakened. The company operates in a challenging environment which requires continuous investment, sometimes at the cost of profitability, to stay ahead of competitors.

Share Price Performance

Daily Chart as of July 29, 2019, after the market closed (Source: Thomson Reuters)

On July 29, 2019, Greatland Gold PLC shares closed at GBX 1.9350 and decreased by 1.777 per cent from the last day closing price. Stock’s 52 weeks High is GBX 2.55, and 52 weeks Low is GBX 0.98. At the time of writing, the share was quoting 24.12 per cent lower than the 52 weeks High and 97.45 per cent higher than the 52 weeks low. Stock’s average traded volume for 5 days, 30 days, and 90 days was 50,762,713.40, 28,959,940.43, and 23,575,383.84. The average traded volume for five days surged by 75.29 per cent against the thirty days average traded volume.

The company’s stock beta stood at 2.12, reflecting higher volatility from the benchmark index. Total outstanding market capitalisation stood at around £65.47 million.

The company’s stock has delivered a price return of positive 40.71 per cent at year-on-year basis, the stock increased by 8.84 per cent at year-to-date basis, and the stock was up by around 19.39 per cent in the past three months. In the past one month, the company’s stock price rose by 20.86 per cent. In the past five trading sessions, the stock surged by around 4.51 per cent.

Base Resources Ltd

Base Resources Ltd (BSE) is a mineral sands developer and producer with operational performance and project delivery added to its accomplishment. The company is developing the Toliara Sands Project in Madagascar and holds the established Kwale Operations in Kenya. The company’s Kwale Operation produced around 590,000 tonnes of rutile, zircon, and ilmenite in the financial year 2018, through zero medical treatments in the previous twelve months. The Toliara Sands Project is a growth asset of the company through construction. The company is listed on the ASX and AIM and is based in Australia.

Quarterly Activities Report, June 2019 (as on 25th July 2019)

The company had a successful evolution of Kwale operations to the South Dune. The company’s production in the financial year 2019 was in line with the expectation. The Kwale North Dune Mineral Resource Project was projected to be worth 171 million tonnes in the financial year 2019 at an average HM grade of 1.5 per cent, comprising 2.6 million tonnes HM based on a 1 per cent HM cut-off grade guidance. Drilling began in the company’s Vanga Prospecting License in April with 8,195 million completed to date. While the zircon prices stabilised, ilmenite and rutile prices were strengthened further by the company. Drilling of 8,195 million was accomplished within the Vanga seeking a license in Kenya. In late 2019, Toliara Project DFS (definitive feasibility study) remains on schedule for completion.

Financial Highlights (H1 FY2019, US$’000)

(Source: Interim Reports, Company Website)

For the reporting period H1 FY2019, the company’s sales revenue surged by 13 per cent to US$102.2 million as compared with the corresponding period of the last year data, achieving an average price of product sold of US$365 per tonne, with average realised prices higher for rutile and zircon, offset by lower prices for ilmenite. Operating cost per tonne produced was up by 20 per cent to US$109 per tonne, driven by an increased volume mined following the implementation of the Kwale Phase 2 mine optimisation project.

Improved commodity prices and a continued focus on cost management has delivered a Kwale Operations EBITDA for the reporting period 2019 of US$61 million, an increase of 8 per cent over the comparative period and a Group EBITDA of US$57.5 million, an increase of 7 per cent over the same period last year.

Net profit after tax increased by 10 per cent to US$22.7 million of Kwale Operations and Group net profit after tax increased by 4 per cent to US$17.4 million as compared with the previous year same period data. Basic earnings per share for the Group was US1.52 cents per share, lower due to additional shares issued in January 2018 to fund the acquisition of the Toliara Project.

Cash flow from operations stood at US$53.8 million for the reporting period, slightly lower than Group EBITDA due to working capital movements. The operating cash flows were used to fund capital expenditure at Kwale Operations, Toliara Project progression, as well as debt servicing and repayment.

In the reporting period H1 FY2019, total capital expenditure for the Group was US$14.0 million including US$7.3 million at Kwale Operations, primarily for the preparatory work for the transition of mining operations to the South Dune deposit, US$6.3 million on the progression of the Toliara Project and US$0.3 million for Corporate capital works.

During the reporting period 2019, the Group became net cash positive for the first time following a US$34.2 million reduction in net debt from US$33.2 million at 30 June 2018, to a net cash position of US$1.0 million at 31 December 2018.

Outlook

For the financial year 2019, Total Kwale Operations production was within the provided guidance range. In FY2020 production guidance, the company expects Mining of 18 million tonnes at an average HM grade of 3.58 per cent, with all volume coming from Ore Reserves. MSP (mineral separation plant) feed rate at an average of 75tph. MSP product recoveries of 100 per cent for ilmenite, 99 per cent for rutile and 77 per cent for zircon.

Share Price Performance

Daily Chart as of July 29, 2019, after the market closed (Source: Thomson Reuters)

On July 29, 2019, Base Resources Ltd shares closed at GBX 13.40, flat from the last day closing price. Stock’s 52 weeks High is GBX 17.84, and 52 weeks Low is GBX 12. At the time of writing, the share was quoting 24.87 per cent lower than the 52 weeks High and 11.67 per cent higher than the 52 weeks low. Stock’s average traded volume for 5 days, 30 days, and 90 days was 44,664.60, 40,874.47, and 83,234.30. The average traded volume for five days surged by 9.27 per cent against the thirty days average traded volume.

On the valuation front, the company’s stock was trading at a trailing twelve months PE multiple of 5.5 times against the industry median of negative 5.4 times. The company’s stock beta stood at 0.45, reflecting lower volatility from the benchmark index. Total outstanding market capitalisation stood at around £169.25 million.

The company’s stock has delivered a price return of negative 17.54 per cent at year-on-year basis, the stock increased by 1.13 per cent at year-to-date basis, and the stock was down by around 10.67 per cent in the past three months. In the past one month, the company’s stock price surged by 5.10 per cent. In the past five trading sessions, the stock declined by around 0.74 per cent.

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