Latest Research

Northern Star (NST) - A Solid FY17 Result

Northern Star LogoNorthern Star Resources (NST) reported double digit growth for their FY17 results with NPAT of $215.3m (+42% y-o-y), EPS up 42% and a final dividend of 6cps (+50% y-o-y). FY17 gold sales came in at 527koz @ $1,675/oz (vs production of 515koz @ AISC $1,013/oz) generating EBITDA margins of 52%. FY18 production is guided at 525-575koz at an AISC of $1000-1050/oz moving to >600kozpa in FY19 as infrastructure reaches maturity at Jundee and Kalgoorlie Operations to support additional throughput. NST announced a shift in its dividend policy which will see it pay out 6% of its revenue and maintain a minimum cash balance of $300m which is earmarked for working capital, opportunistic M&A and organic growth. This is a solid result and we expect to see continued organic growth through exploration success in FY18. NST remains our preferred pick in the gold space. BUY, TP $5.25ps.

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Metro Mining (MMI) - Barging Ahead

Metro Mining LogoMetro Mining (MMI) is progressing rapidly on its Bauxite Hills project in the Cape York Peninsula in Queensland. Earth moving equipment and construction steel for the barge loadout facility are being delivered to site via barges. Due to the simple nature of the operation, construction is expected to take just 4-5 months. MMI is fully funded after securing $40m in debt facilities with Sprott Private Resource Lending and Ingatatus AG Pty and raising $38m via an equity issuance at $13.5¢. The Company is poised to benefit from the rapidly expanding seaborn bauxite market into China by ramping up to ~6Mtpa of DSO product within four years. At current prices, the project would achieve >$25/t margins, facilitating rapid payback of development capex (pre-production capex ~$36m). Argonaut maintains a BUY recommendation with a $0.42 target price.

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Fortescue Metals Group (FMG) - Bumper FY17, But Winter Is Coming

Fortescue Metals Group LogoFortescue Metals (FMG) reported a strong set of FY17 results with underlying EBITDA of US$4.7bn (vs Argonaut $4.8bn) and NPAT of US$2.1bn (vs Argonaut US$1.8bn, +15%). Full year FY17 production came in at 170.4Mt (vs 165-170Mt guidance) at a C1 cost of US$12.82/wmt (-17% yoy). A final dividend of 25cps was announced increasing total FY17 dividends to 45cps, representing a 52% payout ratio. Looking forward to FY18, FMG sees production of 170Mtpa at a C1 cost of US$11-12/wmt and an increase in the dividend payout ratio to 50-80% of net profits. We continue to believe prices will moderate in FY18 as Chinese de-capacity programs and high stockpile levels cap the upside. We also expect FMG’s capacity to maintain high level dividends will be short lived as the proposed US$1.5bn capex for the Firetail replacement options come into play in FY19. HOLD.

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Xanadu Mines (XAM) - The Next Mongolian Empire - Site Visit

Xanadu Mines LogoArgonaut recently visited Xanadu Mines (XAM) advanced stage copper/gold exploration assets in Mongolia. The Company has two core projects, Kharmagtai and Red Mountain, and both contain several clusters of porphyry intrusions with a range mineralisation styles. An intercept of 646m @ 0.51% Cu & 0.87g/t Au at the Stockwork Hill deposit earlier this year confirmed the potential for the Kharmagtai Project to develop into a globally significant porphyry district. Kharmagtai has three defined discrete porphyry deposits, and a fourth would likely provide the critical mass to promote development. We believe the Golden Eagle prospect at Khamagtai could be the next discovery with a gold rich cap identified in shallow RC drilling supported by coincident geophysical and geochemical anomalism. The pipeline Red Mountain Project is well advanced with defined porphyry mineralisation at the Dolerite Hill prospect (184m @ 1.06% Cu Eq) and a massive sulphide intercept at Target 10 (6.2m @ 5.5% Cu Eq). SPEC BUY recommendation.

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Paringa Resources (PNL) - Construction Underway

Paringa Resources LogoParinga Resources (PNL) has commenced construction at Poplar Grove, the first mine to be developed at the Buck Creek Thermal Coal Complex. Excavation of the boxcut is underway in preparation of the slope (decline) construction to access the WK No. 9 coal seam. First washed coal production is expected Q3 CY18. All major contracts have been signed on a fixed price basis which should mitigate price and timing overruns. The Company has achieved ~US$1.2m cost saving on the development capex to date. Argonaut maintains a BUY recommendation with a $1.66 target price.

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