Cora Gold Ltd is an FTSE AIM All-Share listed United Kingdom-based mining royalty company. Moreover, the Company focuses on developing the Sanankoro Gold Project in Southern Mali as well as a continued regional exploration across Mali and Senegal.

Growth Prospects

• Operational Progress: The Company had made significant progress regarding the Definitive Feasibility Study ('DFS') at the flagship Sanankoro Gold Project in Mali. Moreover, it has announced encouraging drilling results for the final fourteenth set from its largest-ever 40,000-metre drill campaign at the Sanankoro Gold Project.
• Definitive Feasibility Study: The Company would undergo DFS during H1 FY22. Moreover, the project got further de-risked after receiving an updated term sheet with Lionhead Capital with respect to the project.

Key Risks

• Negligible Revenue: The Company had not generated any revenue yet as it remained in the exploration phase.
• Failure to Discover Substantial Reserves: The failure in discovering substantial reserves could adversely affect the CORA’s future performance as exploration and development are capital-intensive activities.
• Financial Risk: CORA is exposed to the financial risks associated with fluctuation in the foreign exchange & interest rates, availability of adequate working capital, and credit defaults.
• Increase in US Dollar & Rising Treasury Yields: The strengthening of the US dollar and rise in the treasury yields may create pressure on the gold price.

Gold Industry Dynamics

• Net Outflow in Gold ETF’s: Global gold ETFs had shown a net outflow of around 15.2 tonnes during September 2021, equivalent to USD 830 million, narrowed down from the prior month levels. The Central Banks held around 35,527 tonnes of gold as of July 2021, approximately 17.6% of the above-ground gold stock.
• Growth Catalysts: The slowdown in US GDP during Q3 FY21 and fears of stagflation around the world may benefit gold price in the near term. Moreover, the rising inflation worldwide would benefit gold price as it can be used as a hedging instrument against inflation.
• Adverse Impact of Tapering: Meanwhile, the Federal Reserve meeting minutes had indicated that tapering would begin by mid-November 2021. It may be confirmed in the next Federal Meeting scheduled for 02 November 2021.

(Source: REFINITIV; Analysis done by Kalkine Group)

On a daily chart, COMEX Gold Futures' price (USD 1,783.00) is sustaining above the 20-days Exponential moving average of USD 1,781.70, indicating an upside direction for the commodity. The momentum indicator RSI (14-period) is trading at ~51.35 levels. At the same time, the MACD line remained above the signal line, suggesting an upside potential in the commodity price. 

Now, we will analyze the Key Fundamental Statistics & Shareholding Pattern of Cora Gold Ltd.

Brookstone Business Inc is the most significant shareholder as it holds nearly 71.26 million shares as of 30 September 2021.            

H1 FY21 Financial & Operational Highlights (for six months ended 30 June 2021 as of 16 September 2021)

(Source: Company result) 

• Robust Cash Balance: CORA had a sufficient cash balance of USD 5.70 million as of 30 June 2021. Meanwhile, the cash outflow for operating activities remained £1.2 million for H1 FY21.
• Fundraising Activity: The Company had successfully raised £3.13 million from investors and existing shareholders in June 2021 to pursue growth opportunities for the future.
• Improvements in Earnings per Share: The basic earnings per share got narrowed down from negative 0.41 US cents during H1 FY20 to a negative 0.34 US cents for H1 FY21.

Share Price Performance Analysis

 (Source: REFINITIV; Analysis done by Kalkine Group)

On 01 November 2021, at 09:24 AM GMT, CORA’s shares were trading at GBX 11.00, down by around 8.33% from the previous day closing price. Stock 52-week High and Low were GBX 20.00 and GBX 6.90, respectively.

From a technical perspective, the stock is hovering around the lower Bollinger band, indicating an upside potential in the stock price. Meanwhile, the 14-days RSI stood at ~29.44, approaching oversold territory.

Over the last two years, CORA’s stock price had delivered a positive return of around 80.15%, while the FTSE AIM All-Share index (benchmark index) had produced a return of about 37.32% and the FTSE All-Share Industrial Metals & Mining index (benchmark sector) generated a return of approximately 71.09%.

Valuation Methodology: Price/Book Approach (NTM) (Illustrative) 

Business Outlook

CORA had initiated the largest ever drilling campaign at the key Sanankoro asset, which has produced consistently strong results across all target areas. Moreover, CORA aimed for a transition from explorer to producer over the coming years. Meanwhile, the Company expects to release an updated Mineral Resource Estimate in H2 FY21 and Definitive Feasibility Study (“DFS”) in H1 FY22. Considering the penny nature of the stock, CORA may witness adverse volatile movements amid rising bond yields, increasing inflation rates, and the Evergrande fiasco. Thus, it would depend on the risk appetite of the clients to take a reasonable position on this Company having decent operational parameters.

Considering the solid operational progress, strong liquidity, impressive exploration pipeline, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Cora Gold Ltd at the current price of GBX 11.00 (as on 01 November 2021 at 09:24 AM GMT), with lower-double digit upside potential based on 2.28x Price/Book Value per share (approx.) on FY21E book value per share (approx.). 

*The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and Peer information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

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