Pantoro Limited

Company Overview: Pantoro Limited (ASX: PNR) is a gold producer which operates the Halls Creek Gold Project in the Kimberley Region of Western Australia, and its 50% owned Norseman Gold Project was acquired in July 2019. The company commenced trading on ASX on 21 May 1987.

PNR Details

Growing Ore Reserves to Aid Future Business Growth: The company is a well-known precious metals producer, developer, and explorer with two province scale projects in Western Australia. In March 2022, PNR commenced a large PGE discovery with a major drill program at Halls Creek Project. With respect to Norseman, the company entered a lithium JV with Mineral Resources, wherein Mineral Resources would spend a further $2,500,000 within 18 months. The Norseman Project Ore Reserve now stands at 12.9 Mt @ 2.2 g/t for 900,000 ounces, reflecting a rise of 48% since the October 2020 Definitive Feasibility Study (DFS). PNR would focus on ongoing growth in ore reserves ahead of future production increases. In addition, the construction of a 1 million tonne/110KOz per annum operation is underway at the Norseman project. The company’s future strategy and metals exposure revolve around advancing major PGE discovery at Halls Creek and implementation of ESG.

Insights of Q3FY22:  At Norseman Project, the construction activities were in progress as per the development plan with excellent progress in all areas. PNR closed the quarter with a strong financial position, evident by the cash balance of ~$67.89 million as compared to ~$42.18 million as of 31 December 2021.

Operational Summary (Source: Analysis by Kalkine Group)

1HFY22 Highlights:  The below picture gives an overview of the company’s performance in 1HFY22:

Financial Summary (Source: Analysis by Kalkine Group)

Top 10 Shareholders: The top 10 shareholders together form ~38.70% of the total shareholding, while the top 4 constitute the maximum holding. Robmar Investments Pty Ltd and Tulla Resources PLC are holding a maximum stake in the company at ~12.79% and ~5.98%, respectively, as also highlighted in the chart below:

Top 10 Shareholders (Source: Analysis by Kalkine Group)

Key Metrics: During 1HFY22, the company recorded a current ratio of 2.07x against 1.33x in 1HFY21.

Liquidity Profile (Source: Analysis by Kalkine Group)

Capital Raising: The following picture provides an overview of the company’s recent capital raising and its uses:

Capital Raising (Source: Analysis by Kalkine Group)

Key Risks:

• Climate Change: PNR is exposed to risk arising from the extreme change in the climate, which may pause its operations temporarily.
• Gold Price Risk: The company’s business could be impacted by the adverse movement in the prices of gold as it is a major revenue stream.
• COVID-19 Uncertainties: The company’s operational and financial performance is exposed to risks arising from the uncertainties in relation to the COVID-19 pandemic.

Outlook: With respect to Halls Creek, the key focus of the company revolves around the rapid definition of PGE Mineral Resource and metallurgical requirements at Lamboo. It would also be focused on continuing cash generative production at Nicolsons/Wagtail. The company believes that it will return to full production in September 2022 quarter on the back of the re-opening of borders in the Q3FY22 and additional recruitment of personnel. In the upcoming quarters, the company will be focused on advancing the decline and capital development ahead of the production to ensure adequate working areas. Moreover, the company is focused on making ESG outcomes a priority. For that, the company is building a strong base of existing ESG achievements reflecting its core values.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of PNR is trading below its 52-week low-high average of $0.180 - $0.425, respectively. The stock has been corrected by ~11.71% in the past month. The stock has been valued using a P/E multiple-based illustrative relative valuation method and arrived at a target price of low double-digit (in percentage terms). The company might trade at a slight discount to its peers considering the COVID-19 uncertainties and volatility in the gold prices, etc. For the purpose of valuation, a few peers like Wiluna Mining Corporation Ltd (ASX: WMC), Red 5 Ltd (ASX: RED), Evolution Mining Ltd (ASX: EVN), and others have been considered. Considering the expected upside in valuation, growing ore reserves, a joint venture with mineral resources, recent capital raising, optimistic long-term outlook, current trading levels, and key risks associated with business, we recommend a ‘Speculative Buy’ rating on the stock at the closing market price of $0.275, down by ~3.508% as on 24 May 2022.

Markets are trading in a highly volatile zone currently due to certain macroeconomic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

PNR Daily Technical Chart, Data Source: REFINITIV 

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors’ appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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