Kodal Minerals Plc

Kodal Minerals Plc (LON: KOD) is an FTSE AIM All-Share index listed mining company founded in 2010 and headquartered in London, the United Kingdom. The Company engages in the exploration and development of mineral assets in the United Kingdom and West Africa.

Investment Rationale – Avoid at GBX 0.162

• The Company remained in the development phase and did not generate any revenues. Due to this, the Company is not yet profitable.
• Political changes in Mali could bring significant uncertainties to the Company’s operations in that country.
• The Company needs license to operate in all its mines. There could be non-issuance of new licenses or non-renewal of old licenses given the macro-economic situation.
• Since FY2017, the Company’s ROE is in the negative zone, whereas the industry ROE is positive (5.8%). This could send a negative signal to the shareholders.
• The Company is dependent on equity capital and loans to fund its operations.
• The two-year stock return as on 4 May 2021 was ~14.82%. This is substantially lower than the return of the benchmark index ie FTSE AIM All-Share which was ~33.02% on the same date.

Key Risks  

• Any disruption in operations and uncertainty in demand could impact the business.
• Any delay in exploring Lithium or Gold would affect the revenue generation.
• The volatility in commodity prices, uncertain macroeconomic conditions and demand fluctuation could affect the business.
• The foreign exchange fluctuations could influence financial performance.
• Fluctuations due to changes in market interest risks could influence profitability. 

Recent News

Update on Bougouni Lithium Project: On May 4, 2021, Kodal Minerals provided an update on its mining licence application for the Bougouni Lithium Project. The feasibility study and mining development plan have been ratified and approved, subject to some minor corrections in the application.

Financial Highlights (for six months ended 30 September 2020 (H1 FY2021), as on 23 November 2020)

    (Source: Company Website)

• The Company did not generate any revenues in H1 FY2021 as it is still in the development phase.
• However, due to substantial cost savings, administrative costs reduced by ~45.4% YoY.
• Net loss was significantly down ~24.6% YoY to £255,259 in H1 FY2021 driven by lower administrative expenses.
• Lower net losses, share issuance and proceeds from convertible loans led to cash position up ~176.4% YoY in H1 FY2021.
• In the backdrop of loss making operations, the Company does not offer any dividends to its shareholders.

One Year Share Price Chart

(Source: Refinitiv, Thomson Reuters)

Conclusion

The Company is in the development stage and hence, depends on cash generated from equity offerings and loans to carry out operations. Going forward, the Company has high expectations from the Bougouni Lithium Project in Mali and the Dabakala project in Cote d’Ivoire. However, the Covid pandemic poses significant headwinds to the Company’s operations. The stock made a 52-week low and high of GBX 0.027 and GBX 0.235, respectively.

Based on the above rationale, we have given an “Avoid” recommendation on Kodal Minerals Plc at the current price of GBX 0.162 (as on 5 May 2021 at 8:20 AM GMT), while we would monitor the status of the Company’s key projects and the Company’s liquidity position and revisit our stance accordingly.

TomCo Energy Plc

TomCo Energy Plc (LON: TOM) is an FTSE AIM All-Share listed oil and gas company headquartered in Douglas, the Isle of Man. The Company engages in oil shale exploration and development. It operates nine oil shale leases in Utah, the United States.

Investment Rationale – Avoid at GBX 0.5730

• The Company remained in the development phase and did not generate any revenues.
• The management does not yet have clarity about the future. It is reflected in not providing any detailed guidance.
• The Company incurred significant losses in FY2020 as compared to FY2019.
• The liquidity position has deteriorated despite equity issuance in FY2020.The Company is dependent on equity capital to fund its operations.
• The six-month stock return as on 4 May 2021 was -16.75% which is negative while six-month return of the benchmark index ie FTSE AIM All-Share was 31.81% as on the same date.
• On the technical front, the 200-Day EMA (GBX 0.5961) is higher than the stock price. It points to potential downward movement of the stock.

Key Risks

• The decline in oil prices could influence the cash generation and profitability of the Company.
• The performance is also dependent on the production stoppages, equipment failures and supply chain amid the Covid-19 crisis.
• Changes in Government policy, regulatory risk, etc.
• The foreign exchange fluctuations could influence financial performance.
• Risks related to the environment and climate change could hamper the operations of the Company.
• The Company’s field tests also could be further disrupted by the pandemic.

Recent News

Update on Greenfield: On April 27, 2021, TomCo Energy Plc provided an update on its joint venture Greenfield Energy LLC that Greenfield had identified specific enhancements which could lead to more efficient operation.

New Non-Executive Director: TomCo Energy Plc, on April 19, 2021, announced the appointment of Louis Castro as the new Non-Executive Director.

Financial Highlights (for the year ended 30 September 2020 (FY2020), as on 18 February 2021)

  (Source: LSE Website)

• The Company did not generate any revenues in FY2020 as it is still in the development phase. Hence, its bottom line is still in negative zone.
• Net loss dramatically surged by 36.8% in FY2020 YoY driven by significant rise in administrative expenses. Administrative expenses were up YoY by ~32.4% in FY2020.
• This led to cash position down ~47.7% YoY despite significant equity issuance in FY2020.
• The Company does not propose any dividend to its shareholders as of now keeping in mind it does not generate any profit.

One Year Share Price Chart

(Source: Refinitiv, Thomson Reuters)

Conclusion

The Company’s bottom line and cash position both have shown deterioration in FY2020. The Company is in the development stage, and operations are financed by equity issuance. Due to the lack of clarity, the management did not offer any detailed guidance. Also, the oil and gas industry is facing challenging times as consumer preference is gradually shifting towards alternative energies. . The stock made a 52-week low and high of GBX 0.380 and GBX 2.300, respectively.

Based on the above rationale, we have given an “Avoid” recommendation on TomCo Energy Plc at the current price of GBX 0.5730 (as on 5 May 2021 at 8:05 AM GMT), while we would monitor the outcomes of its ventures & liquidity position and revisit our stance accordingly.

Disclaimer

References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.

This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332. Kalkine Limited is authorised and regulated by the Financial Conduct Authority under reference number 579414.

The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation.

Kalkine does not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation. Kalkine’s non-personalised advice does not in any way endorse or recommend individuals, investment products or services for your personal financial situation. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional authorised financial planner and adviser. You should be aware that the value of any investment and the income from it can go down as well as up and you may not get back the amount invested.