Latest Research

Evolution Mining (EVN) - The Good, The Bad And The Necessary Evil

Evolution Mining LogoEvolution Mining (EVN), delivered a record Q with group production of 209koz produced (previously announced) at an all-in Cost (AIC) A$1,125/oz. Normalised FCF is estimated at A$95.8m, or ~A$460/oz, adjusted for working capital movement, acquisition and integration costs, and interest expense. The March Q result highlighted the benefit of a diversified asset base from recently acquired assets, in particular Cowal. The Company also delivered Resource and Reserve upgrades, increasing its Reserve base to 5.85Moz (was 5.20Moz). Argonaut’s valuation increases to A$1.90 (was A$1.80) based on the updated Reserves. HOLD maintained.

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Cradle Resources (CXX) - Positive Definitive Feasibility Study

Cradle Resources LogoCradle Resources (CXX) released a Definitive Feasibility Study (DFS) for the Panda Hill Niobium Project in Tanzania (JV: CXX 50%, Tremont Investments 50%) highlighting a 30 year project, generating average EBITDA of US$112mpa, a NPV10 of US$404m and 27% post tax IRR. The JV is progressing offtake and finance agreements with development forecast to commence in late-2016 then commissioning in mid-2018. Niobium, which is primarily used as a hardening and lightening alloy in steel, is a growth commodity with 6% CAGR consumption over the last 10 years. Argonaut believes CXX has high corporate appeal given the limited number of niobium mines and no other development project as advanced as Panda Hill. Argonaut maintains SPEC BUY recommendation with $0.48 price target.

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St Barbara (SBM) - Another Q, Another Upgrade

St Barbara LogoSt Barbara (SBM) delivered another better than expected Q, producing 91.6koz (previously announced) @ AISC A$947/oz. The strong results saw the third consecutive production guidance upgrade and costs guidance lowered in FY16. Normalised FCF (adjusted for interest costs and working capital) was A$61m, or ~A$665/oz, which is likely to be one of the highest amongst ASX gold producers. SBM provided an update on the ongoing Materials Handling Study (see below). The low capex (~A$65m) trucking & ventilation option is low risk and can be easily internally funded. BUY maintained. We upgrade our target price to A$2.60 (was A$2.30) factoring in expected production from 1,800m to 2,000 metre below surface (mbs) via trucking and ventilation shafts.

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CTI Logistics Limited (CLX) - Review

CTI Logistics LogoCLX’s WA-based logistics operations in particular have been hard hit by the deteriorating local economy. The downturn may be prolonged (see our WA dashboard) and our revised west-coast FY16 EBITDA forecast is now ~14% lower than FY15 (which was ~23% lower than FY14). However, expansion onto the east coast via the acquisition of GMK has proved timely and is, in our view, underappreciated. CLX looks cheap based on our valuation of $1.55 (prior $1.75) an attractive dividend yield of 9.4%, and compared to peers. Buy call maintained.

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Paladin Energy (PDN) - Transaction Speculation Mounting

Paladin Energy LogoPaladin Energy (ASX:PDN, TSX:PDN) released March Q production with 1.3Mlb U3O8 at US$24/lb C1 cost, compared to December Q of 1.3Mlb @ US$25/lb and Argonaut’s forecast of 1.2Mlb @ US$25/lb. The Company is currently in negotiations for a transaction to partly or wholly repay the outstanding US$212m convertible bonds (CB) due April 2017. At March 31, PDN had US$21m cash and US$362m total face value debt. Argonaut maintains a HOLD recommendation with a revised valuation of $0.29 (from $0.27). Our valuation is impacted by lower near term prices, lower C1 costs and the effect of rising AUD on USD domiciled debt. We apply a 15% discount to NAV to account for balance sheet risk, relating to outstanding 2017 CBs, to attain a $0.24 target price.

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