Latest Research

Sandfire Resources (SFR) - Life Out To 2022

Sandfire Resources LogoSandfire Resources (SFR) released March Q results with 15.5kt copper and 10.9koz gold production at C1 costs of US$0.97/lb versus Argonaut’s forecast of 16.0kt and 8.5koz at US$0.95/lb. SFR’s cash balance continues to increase, up $24m to $188m at 31 March. The mine life at DeGrussa has been extended by ~6 month out to CY22 with the incorporation of orebody extremities. Each additional year’s production has a significant impact on Argonaut’s model, adding ~17% to our NAV10. We downgrade to SELL based on recent share price performance.

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Pacific Energy (PEA) - A Broader Offering

Pacific Energy Limited LogoA 52MW EPC contract awarded to newly acquired Contract Power by Mineral Resources (ASX:MIN) demonstrates the expanded capabilities, broader relationships and additional sectors accessible to the combined PEA business. We believe PEA is strongly positioned to add to a portfolio of installed capacity that is now approaching 400MW, and are less concerned that recent awards have gone elsewhere during a highly competitive period. Visibility via a weighted average contract duration of >4 years and undemanding trading multiples underpins our BUY call on an unchanged $0.80 valuation.

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Western Areas (WSA) - MREP Provides New Opportunities

Western Areas LogoWestern Areas (WSA) released March Q results producing 4.8kt nickel in concentrate, below Argonaut’s forecast of 5.5kt. Mill production was impacted by lower feed grades, which were down ~3% Q-on-Q. Cash and receivables increased by $5m to $154m at 31 March, benefiting from an 8% increase in nickel prices. WSA announced the completion of commissioning of the Mill Recovery Enhancement Project (MREP) this week which should lift overall plant recoveries by 3-5%. This project opens up new opportunities for WSA including nickel sulphate production for the expanding battery market, exploitation of lower quality resources (i.e. New Morning) and licencing the technology to third parties.

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Xanadu Mines (XAM) - High Conversion Rate Of Target To Discovery

Xanadu Mines LogoXanadu Mines (XAM) has continued its exploration success with the discovery of four additional mineralised porphyry systems within its Kharmagtai copper/gold project in Mongolia. To date, XAM has defined at least eight mineralised porphyry centres, demonstrating an outstanding strike rate on the 19 prospective targets identified on the project. Most recently, drilling at the Zaraa prospect returned 316m at ~0.4% Cu Eq. We believe Khamagtai has high corporate appeal to mid to large cap base metal/diversified producers given its world class porphyry locality (hosting RIO’s Oyu Tolgoi deposit) and the scale of the mineralised system with complete, intact porphyries from surface. 

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Evolution Mining (EVN) - Peak Performance And Value

Evolution Mining LogoEvolution Mining (EVN) delivered March Q production of 191koz (+2% vs Dec Q 186koz QoQ) in line with Argonaut’s estimates of 191koz. All-in sustaining costs (AISC) of A$768/oz were -2% lower QoQ (A$784/oz in Dec Q). Standout performance came from the Ernest Henry (EH) asset with 23koz at AISC of negative -$510/oz (including by-product credits). Group operating mine cashflow of $175m (Mar Q $205m) and net mine cashflow of $111.4m (Dec Q $134.2m) were lower than expectations as a result of delayed shipments from Mt Carlton and Cowal and will be realised in the June Q. Group ore reserves increased to 7.1Moz (net of depletion) representing ~9 years of mine life on current production rates. We now forecast production at the mid-point of the revised 790-805koz FY18 production guidance. We revise our target price upwards to $3.01ps ($2.66 prior) and maintain our HOLD recommendation after recent share price strength.

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