Latest Research

Doray Minerals (DRM) - Deflector Turnaround

Doray Minerals LogoArgonaut recently attended a site visit to Doray\'s (DRM) Deflector Mine. We noted a number of recent changes which potentially change project scope going forward. These zones are yet to be incorporated into reserves and the Deflector mine plan, but we see considerable potential for the new mineralisation to add to the mine life and production upside. On our new modelled forecasts DRM trades at an undemanding 4x EV/FCF for FY19, incorporating our forecasts for ~80kozpa Au production and 3.5Kt Cu at AISC of <$1,000oz. Key news flow will include resource upgrades and the potential for increased production via the development of the Link Splay and Da Vinci Lodes by mid-year. BUY (prior HOLD), TP $0.41ps.

read more...

Swick Mining Services (SWK) - Price Adjustments Coming Through

Swick Mining Services LogoA key positive takeaway from the 3Q18 update is the continued improvement in drilling margin. This reflects a strategy to roll over contracts at higher prices and the discipline to walk away from clients unprepared to accept higher rates. Despite the slight downgrade to FY18 guidance, we maintain a positive view on the trends in the drilling business and the blue-sky upside from Orexplore. In our view SWK’s EV is supported by its recovering core drilling business alone and we maintain a BUY call on a $0.37 valuation (prior $0.40).

read more...

Sino Gas & Energy (SEH) - PSC Cost Allocation Principles

Sino Gas & Energy LogoSEH announced that it had finalised the Linxing development phase PSC cost allocation principles with its PSC partner CUCBM. The parties are still deciding on the allocation of costs between development and exploration which may affect whether SEH can recover some of its sunk costs from 100% of the project revenue or from its own share of revenue. The SGE JV (SEH 49%) will have to carry all the development costs until the CUCBM receives full project investment committee approval from its parent CNOOC. Argonaut maintains a BUY recommendation but due to timing uncertainty, our $0.24/share target price is under review.

read more...

Valmec Limited (VMX) - Initiation

Valmec Limited LogoWe initiate with a BUY call and a $0.48 valuation. We expect companies servicing gas and related infrastructure sectors to experience an improving operating environment. VMX, already demonstrating this thesis via its order book and top line performance, provides an attractive investment option from a limited ASX-listed opportunity set.

read more...

Australian Gold Sector - March Q Wrap - Going Down The Curve

Argonaut Limited LogoGold prices have risen by 10% in AUD terms and 7% in USD terms in FY18YTD. Funds flow has been predominantly into mid-tier producers with the ASX Gold Index (XGD) up +17% FY18YTD. Emerging plays have fared well, evident from the surge of the ASX Small Resources (XSR) index which has risen by 48% FY18 YTD. Equity valuations of the mid-tier producers now look stretched and we struggle to identify significant value upside. We speculate this is due to increased North American investment in the ASX Golds versus the US gold producers which have largely underperformed in FY18. Emerging developers have recorded only incremental gains and we argue that in the near-term, investors will look come down the curve into the emerging developer space for value. Our key picks include Dacian Gold (DCN), Gascoyne Resources (GCY) and Gold Road (GOR). We now also identify the next tier of potential development plays including Explaurum (EXU) and Genesis Minerals (GMD) with advanced studies looking to make the transition into production.

read more...