Latest Research

Western Areas (WSA) - Poised To Bounce

Western Areas LogoWestern Areas (WSA) generated normalised positive cashflow of $12.3m in the December Q, increasing the Company’s cash balance to $104m (no debt). Argonaut is anticipating positive cash flow once in the March Q despite an expected 10-12% drop in realised nickel prices. Geopolitical issues impacting Philippine and Indonesia nickel laterite exports to China has driven high nickel price volatility. This, coupled with WSA’s status as the only pure play nickel producer remaining on the ASX, has led to high share price volatility. WSA currently has 18% short interest versus an average of 4.5% for other mid to large cap ASX base metal producers. We believe there is high potential for WSA to rebound to the top of its 12-month trading range of $2.00/sh to $3.20/sh driven by a nickel price recovery, the near-term release of the Odysseus Pre-Feasibility Study (PFS), ongoing exploration results from the Neptune prospect and continued positive quarterly cashflow.

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MZI Resources (MZI) - Operations Turning The Corner

MZI Resources LogoAfter a challenging ramp-up, MZI Resources is on the cusp of achieving design parameters at its 100% owned Keysbrook Mineral Sands Project in Western Australia. The new bank of spirals installed in the Wet Concentrator Plant (WCP) have been commissioned successfully improving heavy mineral (HM) recoveries. In addition, the troublesome mining field unit (MFU) is being replaced this week. However, delays to meet full production rates have stretched the Company’s balance sheet with a number of short term debt facilities due in the current and coming months (detailed below). Argonaut downgrades MZI to a HOLD (from BUY) with a $0.43/sh target price.

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GR Engineering (GNG) - Building The FY18 Order Book

GR Engineering LogoRecent EPC contract wins for Dacian’s (ASX:DCN) Mt Morgans gold project and Gascoyne’s (ASX:GCY) Dalgaranga gold project have added significant weight to GNG’s FY18 order book. According to our estimates, GNG now has approximately $110m contracted revenue in FY18 through its minerals engineering business, with an additional $70m contribution expected from UPS. Based on GNG’s strong order book we have upgraded our FY18 forecasts, increasing our blended valuation to $1.56 (previously $1.50). However, we still believe that GNG’s current share price accurately reflects the Company’s quality and positive outlook. Hold call maintained.

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Metro Mining (MMI) - Compelling BFS for Bauxite Hills

Metro Mining LogoMetro Mining has released an updated Bankable Feasibility Study (BFS) for the Bauxite Hills project in Queensland, Australia. The direct shipping bauxite ore (DSO) project boasts annual EBITDA of $145mpa, a $601m NPV10 and an 81% IRR. This is the first study to incorporate the newly acquired Gulf Alumina tenements which effectively double the Ore Reserve and give access to established haul roads and a cleared barge loadout site. In comparison to the January 2016 Pre-Feasibility Study (PFS), steady state mining has increased from 4Mtpa to 6Mtpa, total delivered cash operating costs have declined ~$3.00/t to $34.70 and initial development capex declined from $40.1m to $35.8m. A key change to the initial study is an additional $36.7m capex in years 2-3 for expansion capex to take the project from 2Mpta to 6Mtpa. BUY recommendation with a $0.44 target price.

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Sulphate of Potash (SOP) - Quality Product From Low-Risk Jurisdiction

Sulphate of Potash LogoThis year will be full of newsflow from prospective WA SOP producers. Further detail will help reduce risks (particularly around extraction and evaporation), encourage investors, and attract the attention of global fertiliser players. We’ve seen with Danakali (DNK) that value uplift occurs well before production (despite its project location in high-risk Eritrea).

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