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OZ Minerals (OZL) released March Q results with 27.5kt copper and 30.8koz gold in concentrate at an all-in sustaining cost (AISC) of US$1.36/lb versus Argonaut’s forecast of 23.0kt and 33.0koz at US$1.30/lb. Open pit operations at Prominent Hill are now complete and mining will now transition to 100% underground ore with the mill being topped up with stockpile feed. Carrapateena development remains on track with $65m spent during the Q, leaving $~743m to completion. In March, OZL announced the acquisition of Avanco Resources (AVB) for ~$418m comprising 50:50 cash and scrip. Argonaut values AVB at $400m making the acquisition roughly value neutral, however we acknowledge the high strategic value as OZL gains a foothold in the proven IOCG district of Carajás, in Brazil.

Metro Mining (MMI) is on the cusp of its first shipment from the Bauxite Hills Project in Northern Queensland. Product is currently being stockpiled with barging and ship loading to commence from the 18th April. MMI’s first sales are fortuitously timed amidst positive macro factors, such as US Sanctions on Russian global major Rusal and Chinese refinery restarts, which are pushing up alumina and aluminium prices. MMI will ship at an initial 2Mtpa rate then ramp up to 6Mtpa over four years, making it the largest Australian bauxite exporter after RIO.

Myanmar Metals (MYL) holds an option to acquire a majority stake in the Bawdwin Mine in Myanmar, which we regard as the best under-exploited polymetallic asset globally. Large scale mining at Bawdwin ceased during WWII leaving intact a high-grade core resource of 41.4Mt at 5.7oz/t silver, 11% zinc & lead and 0.33% copper. MYL is scheduled to exercise its option on Bawdwin in May and gain a 51% majority stake and operatorship of the mining concession which incorporates the resource, a 38km2 land holding, hydro power, and access to strategic transport routes and water. SPEC BUY recommendation.

OZ Minerals (OZL) has made an off-market takeover offer for Avanco Resources (AVB, not covered) comprising 8.5¢/sh cash and 0.009 OZL shares for every AVB share (50:50 cash/scrip). This values AVB at 17¢/sh or $418m which is a 119% premium to the company’s 1-month VWAP. While this represents a significant premium to the last price of 7.7¢/sh, OZL is buying a large portfolio of complementary copper/gold assets and will attain a foothold in a proven IOCG district of Carajás in northern Brazil. Our modelling indicates that OZL can fund the acquisition from existing cash whilst still funding the remaining $808m for the Carrapateena project and maintaining dividends. BUY recommendation.

PEA has acquired Contract Power, one of its key competitors in remote power supply. The $90m acquisition ($85m cash and $5m scrip) will be debt funded with the acquisition price implying a 6x EV to FY19f EBITDA multiple which, in our view, is fair for a business with the sort of long term earnings visibility that Contract Power offers. On our numbers we forecast the deal will be ~10% EPS accretive in FY19. We believe PEA is now very well positioned to capitalise on a strong growth pipeline and maintain our BUY recommendation on a revised $0.80 valuation (previously $0.70).

The $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).

Kidman 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).

Paringa 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.

Northern 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).

The 1H18 performance (revenue $5.9m, net loss from continuing op $2.3m) was weak as expected, although the focus from now on UAVs gives us cause to be optimistic about a 2H recovery. Forecasting risk sees us pare back margins in future periods, dropping our valuation to $0.60 (prior $0.75), but still backs up a speculative buy call. We will be ceasing coverage of OEC following release of this note after a review of companies covered.

We will be ceasing coverage of OEC immediately following release of this note.