Latest Research

Troy Resources (TRY) - Guidance Update

Troy Resources LogoTroy Resources (TRY) has released updated production guidance factoring in operational delays. Whilst processing and weather conditions are improving, TRY has revised its FY17 production guidance to 85-95koz at an all-in sustaining cost of US$750-850/oz (25% downgrade against our forecast). At the same time management are focussing on resources expansion in brownfields development and optimising performance of the processing plant as weather conditions improve at Karouni. The outlook for 2HCY remains optimistic, but further operational issues cannot be ruled out. Management are clearly taking a much needed conservative stance.

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Tox Free Solutions (TOX) - WA Wasting Away

Tox Free SolutionsA weaker than expected 2H performance detracted from FY16’s numbers, and the muted guidance for FY17 is uninspiring. Commentary clearly demonstrate the negative impact from reduced volumes and pricing pressure on the west coast. While the rapid expansion onto the east coast has been a sound strategy to offset the WA drag, it has not prevented us from cutting our forecasts. TOX is trading on ~14x our revised FY17F earnings, which we believe is fair in an uncertain environment. With a $2.65 valuation we downgrade to hold (prior buy) pending margin clarity in coming periods.

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Troy Resources (TRY) - Rain Drops Keep Falling On My Pit

Troy Resources LogoThe impact of heavy rainfall, mechanical breakdowns and issues processing clay ores has seen TRY’s production costs increase at Karouni. At the same time, we see available cash dwindling as debt repayments and commitments to a loss making hedge book limits free cash generation in the September quarter. TRY trades on an undemanding p/NAV of 0.8x (vs sector average 1.3x), the cheapest in the gold sector in our view. We see potential for a short term turnaround as rains abate and if working capital issues can be addressed.

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Kibaran Resources (KNL) - 100% Of Production In Offtake

Kibaran Resources LogoKibaran Resources (KNL) announced a binding agreement with Sojitz Corporation for the supply of a minimum 14ktpa of graphite products into Asian markets. KNL has now committed 100% of forecast production to binding offtake agreements. More importantly, these agreements are with dominant distributers in growing non-China Asian and European markets. Debt financing is well underway and development is expected to commence early-2017. Argonaut assigns a Speculative Buy recommendation with a $0.45 target price.

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GR Engineering (GNG) - Pipeline Potential

GR Engineering LogoUpdated FY16 guidance for EBITDA of $25.5-26.0m is ~20% higher than expected and confirms GNG’s strong performance of late. We don’t think it’s about to end, and a large opportunity pipeline provides upside to FY17 and FY18 forecasts. However, recognising that a pipeline needs conversion and a share price that has more than doubled this year, we change our call to hold (prior buy) pending tender outcomes in coming months. Our positive view of the business is unchanged; in the limited-visibility EPC contracting space, winning work requires a strong balance sheet and a well-regarded management team.

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