Latest Research

Gage Roads (GRB) - Driving brand recognition

Key to strategy execution is growing brand awareness and demand. The shift in the sales mix toward proprietary products in recent months (32% of sales YTD) provides evidence this is happening, as does the better than expected GP margin of 56% (up from 52% in the prior corresponding period). In 1H17 GRB generated 33 cents EBITDA for each litre sold (up 10c on 1H16), setting the Company on a course to reach its targeted $1 EBITDA per litre over the next 5 years. We maintain our valuation, positive view and buy call.

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Sandfire Resources (SFR) - Debt free in time for Monty

Sandfire Resources (SFR) released March Q results with 16.3kt Cu and 9.0koz Au at a C1 costs of US$0.94/lb, lower than Argonaut’s forecast of 17kt Cu and 9.5Koz at US$0.95/lb. Production was impacted by two planned maintenance events. SFR is on track to meet the mid ranges of Cu and Au guidance of 65-68Kt and 35-40koz respectively. Post Q, SFR released the Monty Feasibility Study highlighting three years mine life producing 70kt Cu and 21koz Au at similar cash costs to current operation at DeGrussa. Ore will be processed through the existing DeGrussa Plant. At 31 March, SFR had $90m cash and no debt.

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Quintis (QIN) - Pruning plantations

Only time will prove whether QIN and McKinsey are right about end markets. Naysayers’ strong assertions on the other hand need only stoke fear to see predictions fulfilled. Regardless of who’s right or wrong, ructions caused will impact the business. Accordingly, we assume downgrades in the near term and are more conservative longer term. This reduces our valuation, although at $2.09 (prior $3.30) it still reflects our long-term belief in significant value. We expect this to be largely ignored though while near-term risks are elevated. As a result we downgrade to hold with a $1.50 target price.

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Paladin Energy (PDN) - Fight for survival

Paladin Energy (PDN) released March Q results with 0.9Mlb U3O8 production and 0.7Mlb sales from Langer Heinrich (LHM: 75% PDN, 25% China National Nuclear Corporation [CNNC]), down 26% and 52% respectively Q-on-Q. C1 costs increased 31% to US$21/lb, primarily driven by lower production. Cash at 31 March was US$22m with face value debt of US$382m. The Company is attempting to restructure the balance sheet, but a dispute with CNNC over a potential option to acquire the remaining 75% of LHM has delayed the process.

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Saracen Mineral Holdings (SAR) - Positive cashflow still around corner

Saracen (SAR) released March Q results with group production of 65.1koz gold at an all-in sustaining cost (AISC) of $1,510/oz (previously announced), vs Argonaut’s forecast of 68koz at $1,380/oz. Production was impacted by heavy rainfall and a gearbox failure at Carosue Dam, which offset the benefit of higher mined grades across all operations. Cash outflow was higher than Argonaut anticipated, declining by $13.3m Q-on-Q to $30.6m. HOLD maintained with a $1.05 target price.

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