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There were no big surprises in DCG’s FY18 result, with revenue of $342m (we had $350m) and group EBITDA from continuing operations of $4.7m (we had $2.4m). Eyes were on the outlook though, where DCG has maintained guidance for revenue of at least $500m (underpinned by a solid order book and large potential pipeline). We expect the efforts to diversify into new sectors and geographies to pay off from FY19, make little change to our earnings forecasts, and maintain a valuation of $1.35. A positive macro view and valuation upside continues to support a BUY recommendation.

GRB has kept up the positive momentum with a strong 4Q18 performance and an impressive $4.5m EBITDA (unaudited) for FY18. This was driven by increased volumes and the shift to higher-margin proprietary products, which made up 39% of the total sales mix. The “brand in hand” strategy has not only demonstrably boosted brand awareness, but looks to have made a contribution to earnings given an overall GP margin of 62%. We have upped FY19 forecasts given the strong 2H18 outturn, and largely maintain forecasts further out. Our target price, based on longer-term expectations, climbs to $0.123 (prior $0.117). We like the sector appeal and strategic execution to date. BUY maintained.

This report takes a closer look at ASX listed oil producers. It is a small cohort of companies that have survived the oil downturn and are now beginning to thrive in the higher oil price and lower cost environment. We also have a look at the macro picture for oil and examine the drivers of crude oil demand as we believe that hydrocarbons will have a place in the global energy mix for some time to come. Our view is that the use of renewable energy will increase but not at the expense of hydrocarbon-based energy due to the growing demand from the emerging world. We believe the demand is being driven by the ongoing movement of people into the ranks of the middle class in emerging countries. Our key pick on the ASX is Otto Energy, and we review Australis Oil and Gas, Buru Energy, Byron Energy, Freedom Oil and Gas and Sundance Energy.

Doray Minerals (DRM) reported record June Q production at its Deflector Mine with 18.5koz Au and 818t Cu at an AISC of A$1,196/oz (versus 19koz @ A$986/oz in the March Q). Resources grew by 34% after incorporating the new Link and Da Vinci lodes at Deflector, adding ~180koz at around 18g/t Au which are yet to be incorporated into the mine plan or reserves. Cash increased to $30.7m and debt was reduced to $20.5m (from $27.5m in March Q). FY19 guidance was released with 80-85koz Au and 2,250-2750t Cu at an AISC of $1,050-1,150/oz), a 30% increase on FY18 output. Overall, the growth on multiple fronts has re-invigorated DRM’s appeal as a growth story trading on 5x FY19 PE and EV/Production of $1,900/oz. Flexibility in FY19 production, additional exploration success and an aggressive $10m exploration budget will continue to show further upside appeal in the short and medium term. BUY, TP $0.48ps (prior $0.41).

Dacian Gold (DCN) raised $40m through an institutional placement at a price of $2.70ps. DCN aims to raise a further $5m via a Share Purchase Plan which is expected to close at the end of July. Funds raised will provide additional cashflow flexibility for aggressive exploration targeting higher production rates and a longer mine life at Westralia and additional resource growth at Cameron Well (CW) via a ~110km drill program over 18 months. In addition, DCN will also extinguish the uncapped royalty on parts on the Jupiter mine area at a cost of $12m. Argonaut believes this is well-timed and a prudent move aimed at enhancing the project economics via aggressive growth aspirations. DCN trades on undemanding EV/Production metrics of $3,300/oz vs the peer group averaging $6,000/oz. Once operations reach steady state and exploration gets underway, we expect that DCN’s discount to our NAV and its peer group valuation will unwind. BUY, TP $3.64ps.

Sandfire Resources (SFR) reported June Q results with 17.9kt Cu and 9.5koz Au at US$0.80/lb C1 costs beating Argonaut’s forecast of 18.8kt Cu and 9.4koz au at US$1.08/lb. SFR finished FY18 with 64.9kt Cu and 39.3koz Au, within the revised guidance range of 63-66kt Cu and 38-40koz Au. Monty decline development slowed during the Q and has fallen behind schedule as a result of poor ground conditions requiring addition ground support. SFR’s cash balance increased by $55m QoQ to $243m at 30 June. Interestingly, the Company stated that it is considering a rights issue to fund permitting and a BFS on the Black Butte Project in Montana. We expect this raise will be within Sandfire Resources America Inc (formerly Tintina Resources).

Fortescue Metals (FMG) reported June Q results with a record 46.5Mt shipped at US$12.17/wmt C1 vs March Q 44.7Mt @ US$13.14/wmt (-4% shipped Q-o-Q). Operations ran at an annualised rate of ~200Mtpa during the Q. Gross debt decreased to US$4.0bn (from US$4.2bn in March Q), and cash was higher at US$863m (from US$0.6bn in March Q). Price realisation gap to the Platts 62 CFR index narrowed to 37% (down from 38% in Q3FY18 and 34% in Q2FY18). Strip ratios were unchanged at 1.5:1. HOLD recommendation maintained and we revise our target price to $4.75ps (prior $4.88ps).

St George Mining (SGQ) is steadily increasing the footprint of high grade base metal (Ni, Cu, Co, PGE) mineralisation in the Cathedrals Belt of Western Australia since taking control of the project in early 2016. Argonaut is highly encouraged by the latest drill hole MAD108 at the Investigators Prospect which intercepted 7.6m of sulphide mineralisation, including 1.3m of massive sulphides, down dip of previous holes MAD38 and MAD60 extending the mineralisation ~320m down-plunge. Hand-held XRF reading for the massive component measured 8% Ni and 7% Cu. Exploration along the 4.5km mineralised strike of the Cathedrals Belt is ongoing and we predict the company will be in a position to release a Maiden Resource in late-2018 or early-2019. SGQ is a standout Ni/Cu explorer based on exceptional grades (up to 8% Ni equivalent) and open pittable fresh rock mineralisation.

Western Areas (WSA) released June Q results with 6.4kt Ni in concentrate at C1 costs of A$2.80/lb (before payability), beating Argonaut’s forecast of 4.9kt Ni at A$2.55/lb. The strong finish to the year resulted in WSA meeting revised guidance of ~21kt, with FY18 actual of 21.1kt at A$2.63/lb. The Company generated strong cash flow during the Q adding $16m cash to finish the year at $152m. We believe WSA is in a strong position from cash and future cash flow to self-fund growth projects, including the Odysseus underground mine with pre-development capex of $190-200m (PFS estimate). Upgrade to BUY with a $3.40 target price

Evolution Mining (EVN) delivered March Q production of 202koz (+6% vs March Q 191koz) above Argonaut’s estimates of 193koz. All-in sustaining costs (AISC) of A$846/oz were 10% higher QoQ (A$768/oz in March Q). Standout performance came from the Ernest Henry (EH) asset with 24koz at a record low AISC of negative -$823/oz (including by-product credits) and generating net mine cash-flow of A$59.4m for the Q. Group operating mine cash-flow of $221m (+26% vs Mar Q $175m) and net mine cash flow of $136m (+22% vs March Q $111.4m) were higher than Argonauts forecasts as a combination of record-low costs at EH and improved production. FY18 production of 801koz came in at the upper end of 790-805koz guidance (vs Argonaut 794koz), however operating mine cash flow came in at $812m, well above our forecast as a result of significantly lower AISC which saw the full year come in at A$797/oz, -6% lower than Argonaut forecasts and well below the FY18 A$820-870/oz guidance. The stock remains in line with our valuation. HOLD recommendation maintained.