Latest Research

Austin Engineering (ANG) - Re-Initiation

Austin Engineering LogoANG’s key selling point is its IP. It reflects the considerable R&D that has gone into product design and is the plank underpinning current strategic initiatives. When combined with an improving operating environment (where WA is leading the charge) we expect the leverage within the business to result in significantly improved earnings and returns on capital in coming years. We re-initiate with a $0.22 blended valuation and buy call.

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Gold Road Resources (GOR) - 5 Reasons To Buy Gold Road

Gold Road Resources LogoGold Road (GOR) has commenced early works for the construction of the Gruyere Gold Project (Gruyere). The stock has been largely range-bound despite the announcement of the positive Feasibility (Nov 2016), the announcement of Gold Fields (GF) 50% JV and a further 10% equity purchase by GF at 86cps. Arguably, GOR still has ~18 months until first production, but we see five reasons to buy GOR including i) construction commencing in partnership with Gold Fields, ii) the upsizing of the project to 8.5Mtpa to lift early production >300kozpa, iii) Our analysis of the peer group NAV’s suggests that GOR’s Gruyere project is similar in production, costs and mine life to EVN’s Cowal asset, yet the stock continues to trade at less than half of the value, iv) value accretion occurs in the investment sweet spot during the construction period ahead of production; and v) maintaining a significant 100% owned exploration package with an aggressive $30m spend in CY17/18. Maintain BUY with a revised target price of $1.02ps (prior $1.10ps).

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Metro Mining (MMI) - Futher Off-Take For Bauxite Hills

Metro Mining LogoMetro Mining (MMI) has signed a non-binding letter of intent (LOI) with Shandong Aluminium Company Ltd (Lubei) to supply 0.5-1.0Mtpa of bauxite over three years from the Bauxite Hills Project in Queensland Australia. This takes expected offtake to 60% of production for the first four years of production, incorporating the previously signed binding agreement with Xinfa Group. MMI is on the cusp of commencing development ahead of first production, expected April 2018. Negotiations with debt financiers are well advanced and we expect a funding package to be announced mid-2017. BUY maintained with a 0.$44 target price.

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Saracen Mineral Holdings (SAR) - Cashflow Turnaround

Saracen Mineral Holdings LogoArgonaut expects the June Q to be the turning point for Saracen Mineral Holdings (SAR). We believe the inflection point to positive cashflow has been achieved and free cash generation should increase out to FY20. Following a period of heavy investment into growth and exploration, key projects including a second decline into the Karari mine and pre-stripping of the Thunderbox A Zone are largely complete. As a result, production has lifted to the target 300kozpa run rate and AISC is forecast to decline from ~A$1,350oz in FY17 to A$950/oz in CY20. Upcoming newsflow in H2 CY17 will likely to include; positive cash in the June Q (Argonaut est. $5-10m), a significant reserve and resource upgrade across most operations, a revised group five-year plan, a bulk underground mining study at Thunderbox and further exploration success across the asset base. Argonaut upgrades SAR to BUY from HOLD with a revised target price of $1.22 (previously $1.05).

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Paladin Energy (PDN) - Plan B - Risks Remain High

Paladin Energy LogoPaladin Energy (PDN) announced an alternate balance sheet restructure which includes selling its remaining 75% interest in the Langer Heinrich Mine (LHM) to China National Nuclear Corporation (CNNC). The key differentiators to the previous restructure are; no debt for equity to repay CB holders and the repayment of Électricité de France’s (EdF) ~US$273m security held over PDN’s assets. As a result, the Company would emerge as a uranium developer with a long tern sales contract (LTSC) with EdF valued anywhere between US$140-210m and ~US$188m in Convertible Bonds (maturing 2022). PDN aims to negotiate the LTSC “to remain on foot on terms acceptable to EDF”. If successful, we believe the LTSC could be monetised to repay the majority of the residual CBs. PDN also announced financials for the nine months to March 31 2017 with revenue of US$69m, underlying EBITDA of US$5m and a net attributable loss of US$84m (vs US$122m, US$16m and US$39m respectively for the corresponding period in 2016). Cash at March 31 was US$22m. Sell maintained with a $0.06 target price.

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