Latest Research

Independence Group (IGO) - Pivotal Quarter

Independence Group LogoIndependence Group (IGO) released September Q results with all assets generating positive free cashflow (FCF) and producing within stated guidance. Most notable was Nova nickel /copper achieving commercial production, ramping up to near-nameplate throughput. On a group level, IGO returned to positive FCF, before a $29m debt repayment. Net debt decreased to $142m (from $164m). Argonaut downgrades to a SELL (from HOLD) upon valuation grounds.

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Saracen Minerals Holdings (SAR) - Bursting Out Of The Gate In Q1

Saracen Minerals Holdings LogoSaracen (SAR) released September Q results with group production of 80.3koz, in line with the June Q, with an 11% decrease in all-in sustaining costs (AISC) to A$1,008/oz. Annualised production is tracking at 321koz, well above the 300koz guidance for FY18. However, SAR is resisting an early upgrade, taking a wait-and-see approach on the performance from the high/grade nuggetty Kailis pit which comes on line in the current Q. Cash and bullion increased by $15.3m QoQ to $60.5m. Argonaut maintains a HOLD recommendation and a $1.35 target price.

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Western Areas (WSA) - Recovery Project Opens Up New Doors

Western Areas LogoWestern Areas (WSA) released September Q results with 5.3kt nickel in concentrate production at C1 cash costs of A$2.49/lb (before payability), down 7% and up 3% respectively. The Mill Recovery Enhancement Project (MREP) is well advanced and expected to commence commissioning in Q1 2018. This project will both enhance nickel in concentrate recoveries and produce a higher grade nickel product for the battery market. WSA retains a strong balance sheet with $146m cash and receivables (no debt). Downgrade to SELL based upon valuation grounds.

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Sandfire Resources (SFR) - September Q Results

Sandfire Resources LogoSandfire Resources (SFR) released September Q results with 15.3kt copper and 10.7koz gold in concentrate, down 11% and up 10% respectively QoQ. Production was impacted by planned outages and elevated talc in ore which affected copper recoveries. C1 cash costs remained low at US$0.95/lb. During the Q, development commenced on the Monty underground with the first cut into the decline and first ore from this mine is expected in ~12 months. Cash declined $10m to $117m after a ~$20m dividend payment during the Q. While SFR has strong tailwinds from rising copper prices, negligible debt and low capital commitments, we remain concerned with the lack of exploration success in the Doolgunna region and the limited mine life. Due to share price gain we downgrade to HOLD (from BUY) with a $6.10 target.

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GR Engineering (GNG) - Thunderbird(s) Are Go

GR Engineering LogoGNG has been appointed as preferred tenderer for Sheffield Resources Thunderbird Mineral Sands Project, possibly adding upwards of A$270m revenue and A$25m EBITDA over the next two years. Whilst progression of the project remains contingent on equity funding and a native title appeal in the Full Federal Court, it potentially represents GNG’s largest ever EPC undertaking. The project is not expected to impact our FY18 forecasts, but encouragingly would start to backfill FY19’s order book and underpin the Company’s minerals division for the next two years. BUY maintained.

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