Latest Research

Energia Minerals (EMX) - Sorted

Energia Minerals LogoEnergia Minerals (EMX) released results from ore sorting testwork on a bulk sample from the Company’s 100% owned Gorno zinc/lead deposit in Italy. Initial tests yielded excellent results with up to 60% mass rejection and 94% zinc recovery. Consequently, ore sorting has the potential to significantly reduce capital and operating costs in the upcoming Definitive Feasibility Study (DFS) by reducing the size of the crushing and milling circuit, reducing ore to be transported and milled, increasing mill feed and decreasing contaminants from waste rock. In the lead up to the DFS, EMX is undertaking a Resource drill out of the Colonna Zorzone deposit, which continues to generate high grade intercepts including 4.6m at 25.6% zinc and 4.7% lead. Argonaut maintains a SPEC BUY recommendation with a $0.10 target price.

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Peet Limited (PPC) - Rinse, rePeet - Initiation

Peet Limited LogoWe initiate coverage of Peet Limited (PPC) with a buy recommendation and a valuation of $1.40. PPC has a large, national portfolio of residential property development assets that are increasingly being funded off balance sheet. This capital-light structure has positively impacted returns and debt metrics. In our view PPC can rely on extensive residential property market experience to actively manage the portfolio, identify attractive opportunities, and ride out a period of weaker economic conditions.

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CTI Logistics Limited (CLX) - Downgrade

CTI Logistics LogoWe had assumed weak performance from WA, but CLX’s trading update indicates it’s considerably worse than expected. Group EBITDA for the first 9 months of FY16 is 18% down on the corresponding period last year and we have cut our numbers accordingly. Although we like the east coast diversification strategy and continue to believe there is significant longer term value, we downgrade to hold (prior buy) as we expect investors to focus on the uncertain WA economy and its impact on near term earnings.

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Cradle Resources (CXX) - Anglo Transaction Highlights Demand For Niobium

Cradle Resources LogoGlobally, there are three producing niobium operations, with no new project brought on line in the past ~40 years. In the past two years two of these operations have been acquired for considerable compensation. The latest of these occurred yesterday with Anglo American selling its niobium/phosphate business in Brazil for US$1.5b to China Molybdenum. Earnings from the Catalão mine, which this business unit is centred upon, is proportioned roughly two thirds to niobium and a third phosphate. In late 2014, the Niobec mine in Canada was divested by IANGOLD Corp. to a consortium led by Magris Resources for US$500m. Niobec has delivered consistent EBITDA of US$68-88m since 2008. The 2014 acquisition translated to a ~6.8x EBITDA valuation. Catalão generated US$146m EBITDA in 2015 which translates to a transaction value of ~10x EBITDA. The see through value for Panda Hill is US$760m to US$1.1b (unfunded basis). CXX, who has a 50% share in the deposit, has a current enterprise value (EV) of just A$37m. Argonaut maintains a SPEC BUY recommendation with a $0.48 target price.

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Doray Minerals (DRM) - March Quarter

Doray Minerals LogoDoray Minerals (DRM) delivered 20koz @ AISC A$1,285/oz, largely in-line with Argonaut’s estimate of 19koz @ AISC A$1,237/oz. Andy Well site level FCF was A$6.9m, before increased exploration (A$3.6m) and corporate costs (A$1.7m). Deflector remains on track for first production in June, and Argonaut’s site visit in February confirmed solid progress on project construction. The stock remains one of the few offering imminent production growth. Whilst challenges at Deflector including more complex processing are acknowledged, they are mitigated by experienced management and contractors (GR Engineering, Maca). Despite its size relative to other Australia domiciled producers, the Company is one of the few offering genuine, greenfield fields discovery opportunities. Argonaut downgrades the stock to a SELL (was HOLD) as the stock is now trading >20% higher than our target price. Our TP remains unchanged at A$0.80.

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