Latest Research

ST Barbara Ltd (SBM) - The Comeback Kid

St Barbara Ltd LogoSt Barbara Ltd (SBM) reported double digit growth for their FY17 results with underlying NPAT of $160m (+26% y-o-y), operating cashflow of $303m (+25% y-o-y) and EBITDA of $321m (+13% Y-o-Y). Consolidated gold production for FY17 came in at 381koz at an AISC of $907/oz, at a realised gold price of A$1,685/oz generating EBITDA margins of 50%. FY18 guidance of 350-375koz @ AISC $970-1,035/oz was announced, with production back-weighted to 2HFY18 to incorporate mine sequencing from Gwalia as the extension project is implemented. SBM announced its maiden dividend of 6cps (2% dividend yield), but remains cautious on a consistent policy pending balance sheet strength. FY17 was a standout year with over $228m of debt repaid. SBM has made a stellar comeback, and is appealing longer term. However, with capex expected to double and lower forecast FY18 production and higher costs at Gwalia we see limited upside versus our valuation at this juncture. HOLD maintained.

read more...

Northern Star (NST) - A Solid FY17 Result

Northern Star LogoNorthern Star Resources (NST) reported double digit growth for their FY17 results with NPAT of $215.3m (+42% y-o-y), EPS up 42% and a final dividend of 6cps (+50% y-o-y). FY17 gold sales came in at 527koz @ $1,675/oz (vs production of 515koz @ AISC $1,013/oz) generating EBITDA margins of 52%. FY18 production is guided at 525-575koz at an AISC of $1000-1050/oz moving to >600kozpa in FY19 as infrastructure reaches maturity at Jundee and Kalgoorlie Operations to support additional throughput. NST announced a shift in its dividend policy which will see it pay out 6% of its revenue and maintain a minimum cash balance of $300m which is earmarked for working capital, opportunistic M&A and organic growth. This is a solid result and we expect to see continued organic growth through exploration success in FY18. NST remains our preferred pick in the gold space. BUY, TP $5.25ps.

read more...

Metro Mining (MMI) - Barging Ahead

Metro Mining LogoMetro Mining (MMI) is progressing rapidly on its Bauxite Hills project in the Cape York Peninsula in Queensland. Earth moving equipment and construction steel for the barge loadout facility are being delivered to site via barges. Due to the simple nature of the operation, construction is expected to take just 4-5 months. MMI is fully funded after securing $40m in debt facilities with Sprott Private Resource Lending and Ingatatus AG Pty and raising $38m via an equity issuance at $13.5¢. The Company is poised to benefit from the rapidly expanding seaborn bauxite market into China by ramping up to ~6Mtpa of DSO product within four years. At current prices, the project would achieve >$25/t margins, facilitating rapid payback of development capex (pre-production capex ~$36m). Argonaut maintains a BUY recommendation with a $0.42 target price.

read more...

Fortescue Metals Group (FMG) - Bumper FY17, But Winter Is Coming

Fortescue Metals Group LogoFortescue Metals (FMG) reported a strong set of FY17 results with underlying EBITDA of US$4.7bn (vs Argonaut $4.8bn) and NPAT of US$2.1bn (vs Argonaut US$1.8bn, +15%). Full year FY17 production came in at 170.4Mt (vs 165-170Mt guidance) at a C1 cost of US$12.82/wmt (-17% yoy). A final dividend of 25cps was announced increasing total FY17 dividends to 45cps, representing a 52% payout ratio. Looking forward to FY18, FMG sees production of 170Mtpa at a C1 cost of US$11-12/wmt and an increase in the dividend payout ratio to 50-80% of net profits. We continue to believe prices will moderate in FY18 as Chinese de-capacity programs and high stockpile levels cap the upside. We also expect FMG’s capacity to maintain high level dividends will be short lived as the proposed US$1.5bn capex for the Firetail replacement options come into play in FY19. HOLD.

read more...

Xanadu Mines (XAM) - The Next Mongolian Empire - Site Visit

Xanadu Mines LogoArgonaut recently visited Xanadu Mines (XAM) advanced stage copper/gold exploration assets in Mongolia. The Company has two core projects, Kharmagtai and Red Mountain, and both contain several clusters of porphyry intrusions with a range mineralisation styles. An intercept of 646m @ 0.51% Cu & 0.87g/t Au at the Stockwork Hill deposit earlier this year confirmed the potential for the Kharmagtai Project to develop into a globally significant porphyry district. Kharmagtai has three defined discrete porphyry deposits, and a fourth would likely provide the critical mass to promote development. We believe the Golden Eagle prospect at Khamagtai could be the next discovery with a gold rich cap identified in shallow RC drilling supported by coincident geophysical and geochemical anomalism. The pipeline Red Mountain Project is well advanced with defined porphyry mineralisation at the Dolerite Hill prospect (184m @ 1.06% Cu Eq) and a massive sulphide intercept at Target 10 (6.2m @ 5.5% Cu Eq). SPEC BUY recommendation.

read more...