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Evolution Mining (EVN) - Producing in Ernest

Evolution Mining LogoEvolution Mining (EVN) delivered Dec Q production of 218koz which was above Argonaut’s estimate of 215koz. All-in sustaining costs (AISC) of A$900/oz were -15% lower qoq (A$1060/oz in Sept Q) thanks to operational improvements in most divisions. Standout performance came from a 13% production uplift at Cowal to 72koz and a 10% rise in output at Mungari to 42koz. EVN repaid a further $70m in debt ($90m in Sep Q), with no further debt obligations required until October 2017. Commencement of the Ernest Henry JV asset became effective from Nov 1 and achieved production of 14koz at an AISC of -A$(114)/oz, technically the lowest cost gold producing asset of an ASX gold company. The Cowal E42 resource drill-out for the Stage H cutback studies continued. A decision to proceed due in the March Q which could potentially push mine life out beyond 2032 from the current ~10-year mine life. Argonaut maintains a BUY recommendation and lifts our price target to A$2.67ps (A$2.52 prior).

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Independence Group (IGO) - December Qtr Results

Independence Group LogoIndependence Group (IGO) released December Q results. Tropicana was the standout performer hitting a record throughput rate of 7.6Mtpa and producing 121koz gold (100% basis) at $1,051/oz all-in sustaining costs (AISC) versus Argonaut’s forecast of 101koz at $1,240/oz. Jaguar was impacted by lower grades and poor ground conditions resulting in lower production and higher costs (8.3kt Zn and 0.9kt Cu at $1.08/lb vs Argonaut 9.9kt Zn and 1.7Kt Cu at $0.70/lb). Long performance was steady, producing 2.1kt Ni in ore at A$3.19/lb cash cost, in line with Argonaut’s forecast. Group unaudited NPAT for the Q was $10m and cash decreased to $109m (from $249 at September 30) after $71m free cash flow from operating assets, $71m debt repayments, $47m Nova development capex and $58m stamp duty on the Nova acquisition. Argonaut upgrades IGO to BUY from HOLD.

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Northern Star Resources (NST) - Walking the Path to 600kozp.a.

Northern Star Resources LogoNorthern Star (NST) delivered a strong Dec Q, producing 125koz @ AISC A$1,063/oz (+14% production, -3% on costs vs the Sep Q). Group production was boosted by the significant 25% rebound in production at Jundee to 54koz at an all in sustaining cost (AISC) of A$965/oz (-17% vs Sept Q). Free cashflow from operations was $33.1m (up from A$24m in Sep Q), but impacted by lower gold prices down $105/oz on the previous Q. NST continues to pursue growth ambitions to move to 600kozpa by FY18 from organic sources including resource development drilling and the acceleration of stockpile processing (currently 105koz and growing). We maintain our BUY recommendation and target price of $4.43ps.

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Resolute Limited (RSG) - Making Hay Whilst the Sun Shines

Resolute Mining LogoResolute (RSG) delivered a strong Dec Q, producing 91koz (+15% Q-o-Q) at an all-in sustaining cost of A$835/oz (-29% Q-o-Q). The low-cost production was driven largely by significant cost improvements at Syama with sulphide operations producing 36koz at AISC A$687/oz (-34% cost reduction Q-o-Q) and Syama Oxide production of 26koz at AISC A$451/oz (-54% cost reduction Q-o-Q). Ravenswood plant re-configuration continued with the expansion to 2.8Mtpa. FY17 production YTD of 171koz is tracking well ahead of RSG’s stated FY17 guidance of 300-330koz. We expect a moderation in grade and in 2HFY17, but despite this we expect RSG to achieve the mid-range of stated guidance.

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Threat Protect (TPS) - Funding Package Key Takeaway During Quarter

Threat Protect LogoTPS delivered 2Q17 revenue of $2.4m, higher than the $2.2m in 1Q17, although below the $2.5m revenue in 4Q16. The strategy and future performance is focused on leveraging the Company’s largely fixed cost Monitoring infrastructure through the acquisition of additional lines. Importantly, TPS negotiated a $10.5m funding package during the last quarter to back up the consolidation strategy.

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