Millennial Lithium (CVE:ML) has announced that the Phase 1 drill programme at the Cruz lithium property in the Pocitos Salar in Argentina. ML are operating the programme on behalf of Southern Lithium (SNL CN) who may earn up to 80% in the project. This programme consists of two holes to a minimum depth of 250m based on drilling conditions and brine content. The programme is seeking to confirm the findings of the prior Transient Electromagnetic Survey (TEM) which indicated a continuous N-S conducive unit over more than 6km length. Indications are that brine may be as shallow as 30m and to depths of at least 250m.
We reiterate our Speculative Buy recommendation.
Sunrise Resources (LON:SRES)
Sunrise Resources (SRES LN) has announced that drilling is due to commence imminently at its CS Pozzolan-Perlite project with the trenching programme now complete. 11 trenches in an area of 1,300m x 700m were dug to gain samples from the bedrock, of which ten were successful. The bedrock sampling has been used to better identify suitable drill targets and an extra hole has been added as a result.
Egdon Resources (LON:EDR)#
Egdon Resources (EDR)# has announced it will appeal against the decision of North Lincolnshire Council’s Planning Committee to refuse a second planning application to develop the Wressle oil field.
EDR will also request the planning inspectorate to co-join this new appeal with EDR’s initial appeal against the refusal of planning permission on 11 January 2017, which is currently scheduled for early November 2017.
Separate to this EDR will appeal against the decision to refuse a 12 month extension to the existing planning consent for the site. We retain our BUY recommendation whilst our TP remains under review.
redT energy# Operations Update
redT energy (LON:RED)#, a developer of vanadium redox flow machines for large-scale energy storage applications, has announced an operations update ahead of its AGM later today.
• Significantly lower than expected orders of its low to break-even margin Gen2 product. RED has sold six tank unit modules in H1 2017 (five machines), compared to our FY 2017 estimate of 185 units (50 machines)
• However, the expected EBITDA loss for FY 2017 remains in-line with our expectations due to strong performance from its legacy carbon business
VSA Comment
RED has attributed its slower sales to a fundamental lack of understanding among potential customers of the benefits of flow machines versus alternative large-scale storage products, such as lithium-ion battery systems, a delay in recruiting specific employees, and the expedited closure of Jabil’s Livingstone facility (to August 2017 from December 2017) and relocation of RED’s stack manufacturing operations to a Jabil site in Southern Italy. Although delivering short-term disruption, this relocation will in fact mean lower cost manufacturing for its stack component and, longer-term, lower cost volume manufacturing of Gen3 and subsequent machines.
Despite slower sales, RED has revealed that it now has 265 tank unit modules (€15.9m) in the final stage of customer selection (up from 101 units and €6.5m when it released its FY 2016 results in April) and an active customer pipeline of €314m (vs. €246m in April).
RED has also highlighted the UK and Australia as two markets where the economic payback for energy storage solutions has improved ahead of its initial expectations. RED is now looking to enter the Australian market in H2. In the UK, RED expects to have its 1.08MWh Olde House energy storage project in Cornwall operational within the next few months. This will allow significant marketing opportunities for the company to target potential UK-based customers and should help accelerate its pipeline conversion efforts.
RED has undergone considerable change since the fundraise in December, rapidly scaling up its workforce by some 70%, managing the impact from the closure of Jabil’s Livingston plant by adding a low volume manufacturing partner in Yorkshire, all the while continuing development of its important Gen3 product. Although it is disappointing that Gen2 sales are occurring slower than originally anticipated, in our view, this operational progress is impressive and the focus has to be on the margin-providing Gen3 product, due to be launched in 2018.
We maintain our BUY recommendation and target price of 22p.