Latest Research

MOD Resources (MOD) - Consolidating T3

MOD Resources LogoMod Resources (MOD) has signed a binding agreement to acquire Metal Tiger’s (LON:MTR) 30% stake in the T3 deposit, the key asset in the greater Kalahari Copper Project in Botswana. The all scrip deal, comprising 17.2m MOD shares and 40.6m options (at zero exercise price), values the transaction at $26.6m based on MOD’s 20 day VWAP of $0.46/sh. This implies a see-through value of $87m for the T3 deposit. The transaction incorporates mechanisms to maintain MTR ‘s shareholding in MOD at <=12.5% and gives MOD the option to acquire 100% of joint venture (JV) exploration tenements within the project area. MTR has agreed to support MOD’s Board in any change of control recommendations. We see this transaction as a positive for MOD as it gains 100% of T3, increasing the Company’s control in the project and raising takeover appeal. We highlight MOD’s strategic value as one of the few listed companies globally with an economically feasible copper project and a belt scale land holding. Few acquirable copper plays remain listed on the ASX following the recent acquisitions of Avanco Resources (AVB) and Finders Resources (FND). BUY recommendation with revised target price of $0.83.

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Northern Star Resources (NST) - Its All About What Comes Next

Northern Star Resources LogoNorthern Star (NST) delivered a standout June Q, producing 184koz at an all-in sustaining cost (AISC) of A$982/oz (+48% on production, -8% on costs vs the March Q), well above our expectations and guidance. Underlying free cashflow from operations was $93m (+191% from $32m in March Q). Net cash increased to $512m (+16% Q-o-Q). Group milled tonnes rose by 34%, largely as a result of the integration of South Kal (SKO) production capacity. FY19 production guidance is forecast at 600-640koz at an AISC of A$1,025-$1,125/oz, which we see as conservative. Argonaut believes NST has strong potential to flex milling capacity and move >700kozpa in the short term via existing capacity and toll treatment or potential M&A. NST continues to trade on premium metrics including ~22x EV/FCF and >$6,000oz EV/production. We maintain our HOLD recommendation and we look for additional detail at the Strategy Day on August 4th

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Industrials/WA Economy - Are We There Yet?

Argonaut LogoWA has stabilised, although there is little evidence to suggest growth yet. But given upcoming Pilbara capex spend (see Contracting – pumping iron, 26 June) we believe it’s only a matter of time. In our view the economic pickup will start in 2019, increase into 2020, and be more sustained thereafter

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Saracen Mineral Holdings (SAR) - FY18 Strong Finish, FY19 Production Rising

Saracen Minerals Holding LogoSaracen (SAR) produced a strong June Q to close out the year with 316koz gold production at an AISC of A$1,139, ahead of revised guidance 310-315koz @ A$1,100-1,150/oz. Production for the June Q was 78.9koz at an AISC of A$1,196. The results were in-line with Argonaut’s forecasts of 316koz for the full year and 78.5koz for the June Q. Production is set to rise in FY19 with guidance set at 325-345koz at A$1,050-1,100/oz AISC, below our prior prediction of 352koz @ A$950/oz. The Company added $29.3m net mine cash flow, increasing cash and liquid assets to $118.3m at June 30 (vs Argonaut forecast of $112.7m and March 31 at $101.5m). Maintain SELL recommendation with a $1.85 target price.

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Myanmar Metals (MYL) Sizing-Up A World Class Mine

Myanmar Mines LogoMyanmar Metals (MYL) recently conducted an $35m equity raising (at $0.06/sh) to fund the exercise of the Bawdwin mine option ($14.9m) and to complete feasibility studies. MYL has hit the ground running releasing an updated resource with a 23% increase in Indicated Resources to 25Mt @ 4.3oz/t Ag, 7.9% Zn+Pb and 0.2% Cu. Argonaut regards Arizona Mining’s (TSX:AZ) Taylor deposit as the closest analogy to Bawdwin. AZ was recently acquired by South 32 (ASX:S32) for a total consideration of ~US$$1.4b. We calculate a see-through valuation for MYL of $0.38/sh based on an EV/Resource multiple (contained Zn equivalent). A comparison of the Bawdwin and Taylor deposits is provided in the linked report.

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