Latest Research

Threat Protect (TPS) - Well Connected

Threat Protect LogoThe $8m acquisition of SA-based Security Alarm Monitoring Service (SAMS) adds 55% more connections, diversifies and boosts revenue, increases capacity across the group, and provides organic growth opportunities to leverage infrastructure. Our forecasts are upgraded on an assumption SAMS adds to group margin and, given debt funding, delivers earning accretion. Upgrade to Spec Buy (prior Hold) on a $0.225 valuation (prior $0.170).

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Kidman Resources (KDR) - World Class Scale

Kidman Resources LogoKidman Resources (KDR) released an updated Mineral Resource for the Earl Grey lithium deposit in Western Australia with 189Mt @ 1.5% Li2O for 2,843kt contained Li2O or 7Mt lithium carbonate equivalent (LCE). This represents a 54% increase in LCE and positions Earl Grey to the second largest hard rock lithium deposit globally. The greater Mt Holland project is World Class based on its large scale, wide mineralisation, low strip ratio, further exploration potential and low risk jurisdiction. KDR will have strong newsflow through 2018 with feasibility studies on the spodumene concentrator and lithium carbonate/hydroxide refinery in Q3 and Q4 respectively, as well as potential offtake agreements. The Company is focussing on ex-China markets which we see a valuable differentiator to its peer group of ASX listed hard rock lithium plays. SPEC BUY maintained with a revised target price of $2.50 (from $1.90).

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Paringa Resources (PNL) - Deep Value Despite Weather Delays

Paringa Resources LogoParinga Resources (PNL) released a construction update of its Poplar Grove thermal coal mine citing minor delays from a significant flooding event. The site was impacted by the worst flooding in the Western Kentucky region in 20 years. The impact will likely push production back four weeks from late-August to September/October 2018. Importantly, the sites levy system mitigated any major impact to installed infrastructure or the mine box cut. PNL is trading at a deep discount to Argonaut’s $1.50/sh target price, and despite delays, it is just six months from first production. Recently announced US tariffs and declining US coal inventories should buoy domestic coal demand and prices. BUY maintained.

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Gascoyne Resources (GCY) - On The Road To First Gold

Gascoyne Resources LogoGascoyne Resources’ (GCY) Dalgaranga project remains on time and budget for completion in May 2018. The majority of the critical path items have been delivered to site or are currently being installed. Mining has commenced at Sly Fox with first ores delivered to the ROM pad. At Golden Wings, dewatering and grade control is underway. Power infrastructure is being installed with first gas delivery expected in the coming weeks and gas generator installation expected in early April. First gold is expected around mid-May 2018. Exploration is ongoing with RC drilling at Greencock and aircore drilling at Seagram’s and other regional targets. GCY trades at an undemanding EV/production (forecast FY19) of $2,100/oz versus its producer peer group of ~$4,500/oz and other emerging developers at ~$3,000/oz. GCY also trades on a forward-looking EV/EBITDA of 4.5x versus the peer group average of ~7.0x. GCY trades at 40% discount to our NAV, and as construction is completed and production commences, the discount to our target price should unwind. We maintain our BUY recommendation and target price of $0.84ps ($0.88 prior) after making minor revisions to our model.

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Northern Star Resources (NST) Going South To Drive Production North

Northern Star Resources (NST) - Going Down South To Drive Production NorthNorthern Star Resources (NST) has announced it’s agreed to acquire the South Kalgoorlie Operations (SKO) from Westgold (ASX: WGX). This is a value accretive deal which lifts the constraint on processing that has until now capped production in the Kalgoorlie assets. The acquisition comprises the 1.2Mtpa SKO processing plant and associated resources (4Moz) and reserves (250koz) within the tenement package. Under the agreement NST will pay WGX a consideration of $80m comprising 9.5m NST shares at A$6.30ps for $60m and a further $20m in cash. Settlement of the deal is expected on 1 April 2018. NST has flagged production growth in the 100% owned Kundana assets and we see the increased output being re-directed into the South Kal plant. We see strong potential for NST to lift group production by >100kozpa in FY19. Despite the positives the stock continues to trade ahead of our valuation and this transaction back fills value. We maintain our HOLD recommendation and revise our target price upwards to $6.12ps (from $5.70ps).

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