Kodal Minerals PLC (LON: KOD)

Kodal Minerals PLC is a FTSE AIM All-Share listed Company, which is engaged in the exploration and development of mineral assets. It focusses on Lithium Projects and Gold Projects, in the United Kingdom, West Africa and Norway.

Recent News
29^th May 2020: The Group announced the share issuance of 56,987,211 new ordinary shares at a price of 0.035p per share, to manage certain third-party professional fees.

Company Update (as on 28^th May 2020)
As per the latest update on Bougouni Lithium Project, the Group affirmed that its Feasibility Study, along with the Mining Licence application, has been approved by the Ministry of Mines and Petroleum. However, the Company is still waiting for the formal issuance of Licence documents as COVID-19 restrictions have delayed Mali Government's process, and therefore, the delivery timing cannot be confirmed. Regarding the Gold exploration project, its assets in Cote d'Ivoire and Mali have attracted interests from the investors and other Companies.

Trading Update (as on 7^th April 2020) - Reflecting Remuneration cut and Financing Facilities
The Kodal Minerals affirmed that COVID-19 disruption had affected the Company’s operations in Mali since due to travel restrictions, Company was not able to provide guidance on the license application. Hence, the Group decided to reduce the salary for all its employees by one-third of basic pay. Moreover, the Board and executive have slashed their fees by 60 per cent. Further, the Group had secured a financing facility by issuing 1,428,571,429 ordinary shares, with the investors (Riverfort Global Opportunities PCC Limited and YA II PN Ltd). 

Share Price Performance

Daily Chart as on 8^th June 2020, before the market closed (Source: Refinitiv, Thomson Reuters)

KOD’s shares were trading at GBX 0.0808 on 8^th June 2020 (before the market close at 10.32 AM GMT+1), up by 1.00% against the last day closing price. Stock's 52 weeks High is GBX 0.13 and Low is GBX 0.0191.

From the technical standpoint, 3 days, 9 days and 14 days relative strength index (RSI) of the stock is unfavourable and currently hovering in an overbought zone; hence, the stock price can decline further.

Key Risks
During the first half of 2020, the Group reported an operating loss of £338,641 as against £358,058 in H1 FY2019 since the Company has not begun the commercial production yet and thus, there was no reported revenue. The stock is trading close to 52-week high which raises doubts on the upside potential for stock amid the weak fundamentals

Conclusion – Take Profits Off the Table
From a technical perspective, RSI reflects that it is hovering at the overbought position, and it is not financially viable to take a fresh position now. Hence, it seems that there is a certain correction due to happen. The stock has been bullish and has already yielded around 174 per cent in the last 1 week and around 126 per cent of sparkling return in the last three months. Hence, it seems rational to extract the best possible gains now and re-enter to take a fresh position again when the corrections are being done. Therefore, it is advisable to book profit now and reinvest the amount of principal and gains at the right time and level.

Based on the risks associated and factors discussed above, we have given a “Sell” recommendation at the current price of GBX 0.11 (as on 8^th June 2020, before the market close at 8.28 AM GMT+1), while we will look forward to reinvesting at the correct time when the due corrections are done. 
 
*All forecasted figures and Peers information has been taken from Refinitiv, Thomson Reuters.

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