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Dacian Gold (DCN) reported preliminary Dec Q production of 38koz (+29% vs 29.3koz in the Sept Q). Commercial production has been achieved with mining rates across the operations achieving Feasibility Study design levels of ~8Ktpd (5ktpd from open pit, 3ktpd from underground). Overall, the Q was in line with expectations vs Argonauts forecast of 40koz. Cash increased to $85.6m in the Dec Q (+$3.5m vs $82.1m in the Sept Q). Argonaut forecasts that production should have risen to ~700kt at 1.7-1.9g/t (from 681kt @ 1.4g/t in the Sept Q) to achieve this production result. Buy maintained and target price of $3.50ps.

Otto Energy's South Marsh Island Oil field (SM71) continues to perform within expectations and the newly re-completed F2 is producing a steady 180 bbls/day. SM71 has reached project payback within the projected 12 months. OEL is drilling the second well in the Hillcorp program and preparations are underway for the drilling of the Winx-1 well on the North Slope in Alaska. We maintain our BUY recommendation with a target price of $0.10.

Heading into 2019 and the interim reporting season, we have reviewed our forecasts and valuation for Valmec. Despite heightened global concerns, we maintain a positive view on the tailwinds behind gas construction and operations services in Australia. As a result our forecasts and valuation of $0.42 are unchanged. On our numbers VMX is trading on undemanding forward multiples, suggesting considerable share price upside potential. BUY maintained.

Heading into 2019 and the interim reporting season, we have reviewed our forecasts and valuation for Swick Minings Services. The performance over the last few quarters, particularly with regard to margin, has been impressive, and has led to an earnings upgrade in this note following a strong 1Q19. A key near term risk is whether the large Newmont contract is rolled over, however our blended valuation of $0.34 ex Orexplore, and $0.40 including Orexplore (prior $0.38), provides enough upside to support a BUY call regardless of the Newmont outcome.

Heading into 2019 and the interim reporting season, we have reviewed our forecasts and valuation for SRG Global. We recently updated forecasts post the AGM and guidance in November, and make no changes to our FY19 numbers. We have pared back FY20 growth slightly due to uncertainty over contract timing, but note the broader opportunity pipeline post the SRG-GCS merger suggests upside. Adjustments sees our valuation fall to $0.70 (prior $0.75);
still ahead of the current share price post its recent drop. We like the long-term potential, although acknowledge near term focus will be on integration and contract timing risks.

Heading into 2019 and the interim reporting season, we have reviewed our forecasts and valuation for SCEE. In upgrading to BUY following the full year results in August, we noted SXE had transformed itself in recent years, substantially reducing exposure to resources, increasing its scale and diversity, and improving its earnings visibility. These attributes are such that we believe sufficient conservatism has already been built into our forecasts, and we make no changes in this update. Our blended valuation remains $0.85 and we maintain a BUY call on medium-term growth potential and a less risky business model.

Heading into 2019 and the interim reporting season, we have reviewed our forecasts and valuation for Pacific Energy. We recall the AGM in November was upbeat, with the Company indicating it was on track to beat the $54-55m underlying EBITDA guidance provided in August. PEA’s ability to provide and meet guidance shows the attraction of the business model, with average contract length of ~4 years on take or pay terms offering good visibility. We see no reason to adjust our forecasts for the next two years, and believe the stock is undervalued on a slightly more conservative valuation of $0.73 (prior $0.75). PEA provides lower risk exposure to mining services. BUY maintained.

Heading into 2019 and the interim reporting season, we have reviewed our forecasts and valuation for GR Engineering. Both have been pulled back, the latter to $1.30 (prior $1.55). We continue to like the business; it is a well-managed, quality EPC contractor, with a strong track record. However, in an environment less conducive to mining project progress, and with the timing of Thunderbird in particular providing a high degree of near term earnings uncertainty, we believe a HOLD (prior BUY) is more appropriate pending greater clarity.

Heading into 2019 and the interim reporting season, we have reviewed our forecasts and valuation for Decmil. Given exposure to government-funded infrastructure and capex spend by the majors in resources, we remain positive on top-line growth potential. Uncertainty relates more to margin, particularly with rapid revenue growth, and we build more caution into our forecasts and valuation calculations. Our blended valuation of $1.10 (prior $1.20) is well ahead of the current price, although investors will likely need reassurance on solar contract risk, and evidence of a stronger 2H19, before reacting to our maintained BUY call.

Heading into 2019 and the interim reporting season, we have reviewed our forecasts and valuation for Ausdrill. Tighter liquidity and heightened uncertainty are key risks to project progress and therefore pose a risk to organic growth. As a result, our forecasts now largely reflect the existing level of work, with contract wins to provide potential upside. We also up risking to calculate a revised valuation of $2.00 (prior $2.25). This is significantly ahead of the current price, in our view providing a good opportunity to BUY a quality business.