Latest Research

Sino Gas & Energy (SEH) - Stepping On The Gas

Sino Gas & Energy LogoSino Gas and Energy (SEH) has reached an agreement with Sanjiaobei (SJM) partner PetroChina CBM (PCCBM) for the allocation of pilot production sales revenue. While the outstanding payment was minor (~US$2m), the agreement clarifies payment terms under the piloting phase and sets the tone of the relationship under the Production Sharing Contract (PSC). SEH has been substantially de-risked year-to-date by the signing of gas sales allocation agreements at both SJB and Linxing (LX), as well as the replacement of indebted Sino Gas Energy (SGE) JV partner MIE Holdings with China New Energy Mining Limited (CNEML). The restart of SJM now is planned for Q3 2016 and SEH will chase the combined SJB and LX production target of 25MMscf/d by year’s end. Net cash at June 30 was $47.5m. Argonaut maintains a BUY recommendation and a $0.25 target price.

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OZ Minerals (OZL) - Cash Continues To Build

OZ Minerals LogoOZ Minerals (OZL) released June Q results with production of 27.4kt copper and 30.0koz gold in concentrate, below Argonauts’ forecasts of 31kt copper and 32koz gold. Prominent Hill was impacted by a planned outage and unplanned repairs to the SAG mill which resulted in a 10% reduction in plant availability. Despite the lower production, total cash costs declined 4% to US$0.87/lb (vs Argonaut forecast US$0.90/lb). During the Q, OZL announced PYBAR Mining Services as the party to construct the Carrapateena decline which is due to commence in August. The Company increased its cash balance to $564m (from $533m at March 31) after exploration and the ongoing share buy-back. Argonaut upgrades OZL to a HOLD recommendation with a revised target price of $6.15 (previously SELL at $5.25). The key change to our valuation in the incorporation of the 4Mtpa Carrapateena case (increasing our valuation of this asset from ~$200m to $378m). We apply a 30% discount to Carrapateena, accounting for development risk. Our valuation also incorporates higher production and lower capex, bringing our assumptions largely in-line with the Company’s long term guidance.

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TFS Corporation (TFS) - Note Refinance

TFS Corporation LogoThe issue of US$250m Notes maturing in 2023 at a coupon of 8.75% will allow TFC to redeem the 11.00% p.a. US$200m existing Notes, achieving the twin goals of extending the debt maturity profile and lowering its cost. It comes at a time when TFC is exhibiting strong operational momentum. There is continued interest in the investment product, harvest sizes are increasing, and the Company is deepening its end markets. Buying back grower interests in plantations gives TFC greater ownership and control over supply, and we expect improved cash flow from operations to be a feature of the FY17 numbers. Our valuation increases to $3.30 (prior $3.05) and we maintain a buy call.

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Paladin Energy (PDN) Monetising Assets To Repay Debt

Paladin Energy LogoPaladin Energy (PDN) announced an outcome to its ongoing strategic initiatives. The Company has signed non-binding term sheets to sell a further 24% of its flagship Langer Heinrich Mine (LHM: currently 25% PDN, 75% China National Nuclear Corp.) to an undisclosed party for US$175m. In addition, PDN has entered a binding agreement to sell up to 75% of the Manyingee development project for US$30m to MGT Resources. The initial US$185m raised from these two transactions, in addition to accumulated cash, should be sufficient to repurchase the outstanding US$212m convertible bonds (CBs) due April 2017. While this transaction removes near term balance sheet pressure, it does remove some of PDN’s leverage to a uranium price recovery.

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Dacian Gold (DCN) - Jupiter Resource Update

Dacian Gold LogoDacian Gold (DCN) released an updated Resource for the Jupiter Prospect, part of the Mt Morgans Gold Project. The total Resource increased by 207koz or 19% to 1.4Moz at 1.3g/t. Importantly, the Measured and Indicated Resource categories increased 69% to 1.1Moz. This represents the first of three Resource reports expected in July, with updates on the Westralia and Morgans underground deposits to follow shortly. Regional exploration is ongoing with drilling of the +8Moz Wallaby lookalike Callisto prospect to commence in the coming weeks. Argonaut maintains a BUY recommendation with a revised target price of $3.60 (previously $3.25).

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