Latest Research

Sino Gas & Energy (SEH) - On The Cusp Of Full-Scale Development

Sino Gas & Energy LogoSino Gas and Energy (SEH) has provided detail on the proposed development plan for its Ordos Basin gas assets outlining staged development with Phase 1 production of 350-550MMscf/d (60-90mboe/d). This release coincides with the submission of the first Linxing (LX) ODP (Overall Development Plan) to PSC Partner CUCBM. SEH has secured up to US$100m of debt funding with Macquarie which should fund development through to positive cashflow, expected in 2020. The Company also released September Q results. Downstream issues impacted gas offtake nominations from the Sanjiaobei (SJB) Central Gathering Station (CGS), resulting is a 14% QoQ drop in production to 13MMscf/d rate. Cash and debt at 30 September were US$30.5m and US$10.0m respectively.

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MZI Resources (MZI) - Operations Lifting, Debt Pushed Back

MZI Resources LogoMZI Resources (MZI) released September Q results with 22.0kt of mineral sands production, up 77% QoQ. Total cash costs were $728/dmt, down 25% on FY17, vs the realised basket price of $735/dmt. Importantly, costs are trending down while mineral sands prices have shown a consistent QoQ increase from mid-2016. While the Company’s balance sheet remains stretched, repayment of the US$21m bridging facility to Resource Capital Fund (RCF) has been pushed out to April 2018 (previously due December 2017). At September 30, MZI had $4.8m cash. Hold recommendation maintained.

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West African Resources (WAF) - High Grade Updated To M1 South And M5

West African Resources LogoWest African Resources (WAF) released a resource upgrade for its Sanbrado Project in Burkina Faso. The update included a material upgrade to the M1 South and M5 deposits which has seen total contained ounces increase by 25% to ~2.7Moz Au. Deep drilling at M1 South has extended mineralisation beyond 500m below surface and has resulted in a 150% increase in contained ounces to 747koz (vs 298koz prior) with average grades almost doubling to 14.4g/t (from 7.5g/t prior). The update to the M5 deposit saw a 6% increase in gold and a 40% increase in Indicated ores which will see a significantly higher proportion of resources into reserves. Argonaut believes this result will have a significant positive impact the project economics in the updated Feasibility due in Q2CY18. We now model larger production in our forecasts to account for the higher grade underground ores. As a result, our valuation increases to $0.62ps (prior $0.44ps) and we maintain our BUY Recommendation.

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Pacific Energy (PEA) - Newmont Going Gas

Pacific Energy LogoPEA continues to grow organically through contract expansions with existing customers, adding 13MW additional capacity recently. The Company now has record contracted capacity of 293MW locked in for a weighted average term of four years. However, a likely shift to gas at Newmont’s Tanami Desert operations provides likely near-term negative sentiment. Our unchanged $0.70 valuation factors in a 75% chance of PEA losing the Newmont contract. Despite valuation upside to the current share price we maintain a HOLD due to intensifying competition and until more clarity on Newmont materialises.

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CTI Logistics Limited (CLX) - Across The Nullarbor

CTI Logistics Limited LogoThe $7.5m acquisition of Jayde Transport fits with CLX’s intention to build a national transport and logistics business. It is strongly accretive given a compelling EBITDA acquisition multiple of 3.2x. We anticipate a slowly reviving WA economy to be reflected in west coast earnings over time, while an increasing east coast exposure expands CLX’s footprint and provides stability. We believe CLX is building a solid platform off which to grow, is ably led by an experienced management team, and is trading on undemanding multiples. We maintain a buy call on a revised valuation of $1.60 (prior $1.50).

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