Latest Research

Northern Star Resources (NST) - The Calm Before The Production Storm

Northern Star Resources LogoNorthern Star (NST) delivered a lower March Q, producing 124koz at an all-in sustaining cost (AISC) of A 1,075/oz (-4% on production, +1% on costs vs the Dec Q). Underlying free cashflow from operations was $32m (-8% from $34.9m in Dec Q). Net cash and investments increased to $439.1 (+1% Q-o-Q). Group milled tonnes fell by 6%, largely as a result of the cessation of production at Paulsens which impacted group throughput. Despite the lower production, NST is achieving record throughput and mining rates throughout the portfolio, reflecting the investment in the 600kozpa growth strategy. June Q production is now forecast at 150koz (>20% QoQ) which would see FY18 production reach the middle of the refined 540-560koz guidance range. Maintain HOLD and TP of $6.12.

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Sandfire Resources (SFR) - Life Out To 2022

Sandfire Resources LogoSandfire Resources (SFR) released March Q results with 15.5kt copper and 10.9koz gold production at C1 costs of US$0.97/lb versus Argonaut’s forecast of 16.0kt and 8.5koz at US$0.95/lb. SFR’s cash balance continues to increase, up $24m to $188m at 31 March. The mine life at DeGrussa has been extended by ~6 month out to CY22 with the incorporation of orebody extremities. Each additional year’s production has a significant impact on Argonaut’s model, adding ~17% to our NAV10. We downgrade to SELL based on recent share price performance.

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Pacific Energy (PEA) - A Broader Offering

Pacific Energy Limited LogoA 52MW EPC contract awarded to newly acquired Contract Power by Mineral Resources (ASX:MIN) demonstrates the expanded capabilities, broader relationships and additional sectors accessible to the combined PEA business. We believe PEA is strongly positioned to add to a portfolio of installed capacity that is now approaching 400MW, and are less concerned that recent awards have gone elsewhere during a highly competitive period. Visibility via a weighted average contract duration of >4 years and undemanding trading multiples underpins our BUY call on an unchanged $0.80 valuation.

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Western Areas (WSA) - MREP Provides New Opportunities

Western Areas LogoWestern Areas (WSA) released March Q results producing 4.8kt nickel in concentrate, below Argonaut’s forecast of 5.5kt. Mill production was impacted by lower feed grades, which were down ~3% Q-on-Q. Cash and receivables increased by $5m to $154m at 31 March, benefiting from an 8% increase in nickel prices. WSA announced the completion of commissioning of the Mill Recovery Enhancement Project (MREP) this week which should lift overall plant recoveries by 3-5%. This project opens up new opportunities for WSA including nickel sulphate production for the expanding battery market, exploitation of lower quality resources (i.e. New Morning) and licencing the technology to third parties.

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Xanadu Mines (XAM) - High Conversion Rate Of Target To Discovery

Xanadu Mines LogoXanadu Mines (XAM) has continued its exploration success with the discovery of four additional mineralised porphyry systems within its Kharmagtai copper/gold project in Mongolia. To date, XAM has defined at least eight mineralised porphyry centres, demonstrating an outstanding strike rate on the 19 prospective targets identified on the project. Most recently, drilling at the Zaraa prospect returned 316m at ~0.4% Cu Eq. We believe Khamagtai has high corporate appeal to mid to large cap base metal/diversified producers given its world class porphyry locality (hosting RIO’s Oyu Tolgoi deposit) and the scale of the mineralised system with complete, intact porphyries from surface. 

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