Patriot Battery Metals Inc (CNX: PMET) is a mineral exploration company focused on the acquisition and development of mineral projects containing battery, base, and precious metals. The company's flagship assets are the wholly owned Corvette Property, and the FCI Property located in the James Bay Region of Quebec and the Freeman Creek Gold Property, located in Idaho, USA.

Key highlights

• No recognition of revenue: Till date the Company has not received any income from product sales and has relied on the proceeds of public and private equity and convertible debt offerings to support its operations. Even the management does not expect product sales to produce income in the near future.

• Elevated expenses and net loss: For 9M 2021, the Company’s total expenses stood much higher at CAD 3.8 million, compared to CAD 0.5 million in the previous corresponding period. The same amount was taken into the account of net loss, respectively for the same period.

• Negative cash flows: For the period of nine months on December 31, 2021, the company reported cash used in operating activities of CAD 2.32 million, which stood higher from CAD 0.40 million in the previous corresponding period. We believe, this was primarily due to the higher level of cash expenses and net losses which occurred in the period.
  

• Stretched valuations: The shares of PMET are available at an TTM Price/Book Value multiple of 12.1x compared to the industry (Basic Materials) median of 1.9x. This implies that the shares are extremely overvalued against the industry.

• Exhausted technical indicators: Recently, the stock witnessed a healthy rally on the daily price chart and has moved above the upper band of the Bollinger band, indicating the stock is perhaps overbought and due for a price correction or a consolidation. Furthermore, the momentum oscillator RSI (14-Period) is trading at ~72.67 levels, which also indicates that the stock is in overbought zone and there is a deep possibility of price consolidation or correction.

Source: REFINITIV, Analysis by Kalkine Group

Stock recommendation

The company is currently in the early stages of exploration and has yet to generate any revenue. Furthermore, no guidance on revenue realization has been provided by management. Additionally, the firm recently reported greater input costs, which resulted in a larger deficit. Meanwhile, the company is trading at stretched values, and the technical signal shows that the stock may be overbought and due for a price correction or consolidation.

Therefore, based on the above rationales and limited financial information we recommend “Watch” rating on the stock at the last closing price of CAD 2.46 on May 3, 2022. Additionally, the markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

One-Year Technical Price Chart (as on May 3, 2022). Source: REFINITIV, Analysis by Kalkine Group 

Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario. 

Technical Analysis Summary

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.