Latest Research

Saracen Mineral Holdings (SAR) - Cashflow Turnaround

Saracen Mineral Holdings LogoArgonaut expects the June Q to be the turning point for Saracen Mineral Holdings (SAR). We believe the inflection point to positive cashflow has been achieved and free cash generation should increase out to FY20. Following a period of heavy investment into growth and exploration, key projects including a second decline into the Karari mine and pre-stripping of the Thunderbox A Zone are largely complete. As a result, production has lifted to the target 300kozpa run rate and AISC is forecast to decline from ~A$1,350oz in FY17 to A$950/oz in CY20. Upcoming newsflow in H2 CY17 will likely to include; positive cash in the June Q (Argonaut est. $5-10m), a significant reserve and resource upgrade across most operations, a revised group five-year plan, a bulk underground mining study at Thunderbox and further exploration success across the asset base. Argonaut upgrades SAR to BUY from HOLD with a revised target price of $1.22 (previously $1.05).

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Paladin Energy (PDN) - Plan B - Risks Remain High

Paladin Energy LogoPaladin Energy (PDN) announced an alternate balance sheet restructure which includes selling its remaining 75% interest in the Langer Heinrich Mine (LHM) to China National Nuclear Corporation (CNNC). The key differentiators to the previous restructure are; no debt for equity to repay CB holders and the repayment of Électricité de France’s (EdF) ~US$273m security held over PDN’s assets. As a result, the Company would emerge as a uranium developer with a long tern sales contract (LTSC) with EdF valued anywhere between US$140-210m and ~US$188m in Convertible Bonds (maturing 2022). PDN aims to negotiate the LTSC “to remain on foot on terms acceptable to EDF”. If successful, we believe the LTSC could be monetised to repay the majority of the residual CBs. PDN also announced financials for the nine months to March 31 2017 with revenue of US$69m, underlying EBITDA of US$5m and a net attributable loss of US$84m (vs US$122m, US$16m and US$39m respectively for the corresponding period in 2016). Cash at March 31 was US$22m. Sell maintained with a $0.06 target price.

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West African Resources (WAF) - High Grades Running Deep At M1

West African Resources LogoWest African Resources (WAF) has released updated drill results from the M1 South deposit at Sanbrado in West Africa. The latest high grade intersections included 29.5m @ 20.7g/t Au and 22m @ 10.5g/t Au. Mineralisation in the southernmost shoot extends down to around 400m below surface with visible gold recorded in the last hole drilled. WAF has five rigs (a sixth arriving this month) drilling out the deeper portions of the main part of M1’s 350m strike extent which is twice the depth of the current reserve used in the Feasibility Study. Argonaut believes the high grades and significant depth extension will result in a significantly increased resource (currently ~300koz), but more importantly, the real value will come from the significant impact to the economics of the optimised Feasibility Study (FS). BUY, TP $0.40ps.

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Dacian Gold (DCN) - Infilling Reserves And Value

Dacian Gold LogoDacian Gold (DCN) has reported high grade results from an infill drill program at its Mount Morgans Project in Western Australia. The program focused on the upper levels at the Beresford underground mine and aimed at refining the mine plan, firming up the geological model and infilling and extending known mineralisation in preparation for first production. The results of the drill program have shown that i) high grades shoots occur outside the current Ore Reserve in close proximity to existing development and ii) mineralisation is broader than initially modelled in some areas such that bulk mining methods may be employed. DCN will now move to update its mine plan at Beresford and complete an 18-hole program at Allanson with a similar infill program ahead of mine development. Maintain BUY and target price of $3.00ps.

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Pacific Energy (PEA) - Powering On

Pacific Energy LogoPEA has begun to deliver on a substantial 125MW pipeline (tendered or priced). The recent 11MW Altura Mining contract win, along with 11MW of additional capacity secured with existing customers, takes PEA’s Group contracted capacity to 278MW. The strength of PEA’s order book and the potential for further material contracts in the coming months has provided cause for us to upgrade our FY18 and FY19 forecasts for the Company. PEA is a standout performer in the typically volatile resource services space and we maintain a buy call on a revised blended valuation of $0.85 (prior $0.82).

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