Latest Research

Paringa Resources (PNL) - Nearing Production

Argonaut recently visited Paringa Resources’ (PNL) Poplar Grove thermal coal development project in Kentucky, US. Construction is nearing completion with the coal handling and preparation plant (CHPP) largely complete and the overland conveyer and barge loadout facility due for completion in the coming weeks. The mine decline/slope is expected to meet the coal face in 3-4 weeks and the first saleable barge lode is anticipated in mid-January. Poplar Grove will produce 2.8Mtpa and will be the first of two mines constructed within the greater Buck Creek Project, including the 3.8Mtpa Cypress mine. PNL is fortuitously commencing production in a period of record low coal inventories and uncompetitive gas prices. This should favour the signing of further sales contracts, beyond the 5.4Mt already contracted between 2019-2022. Argonaut maintains a BUY recommendation and a $0.80 target price.

Argonaut recently visited Paringa Resources’ (PNL) Poplar Grove thermal coal development project in Kentucky, US. Construction is nearing completion with the coal handling and preparation plant (CHPP) largely complete and the overland conveyer and barge loadout facility due for completion in the coming weeks. The mine decline/slope is expected to meet the coal face in 3-4 weeks and the first saleable barge lode is anticipated in mid-January. Poplar Grove will produce 2.8Mtpa and will be the first of two mines constructed within the greater Buck Creek Project, including the 3.8Mtpa Cypress mine. PNL is fortuitously commencing production in a period of record low coal inventories and uncompetitive gas prices. This should favour the signing of further sales contracts, beyond the 5.4Mt already contracted between 2019-2022. Argonaut maintains a BUY recommendation and a $0.80 target price.  

West African Resources (WAF) - Funding Secured

West African Resources Logo

West African Resources (WAF) has announced an underwritten placement and SPP to raise $48.2m and a US$200m debt finance facility. WAF is now fully funded for development of its Sanbrado Project in Burkina Faso. Portal establishment is underway and a DFS update is due in Q1CY19 along with first debt drawdown and commencement of major works. First gold is due in Q32020. Recent deeper drilling at M1 South suggests the potential to extend reserves and thus backfill the mine life from year 6 onwards. WAF remains a quality project that is now funded to production, whilst execution risk remains, the first mover advantage could pay off longer term in WAF potentially moving into a predatory role against other players in the region.

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SRG Global (GCS) - Building A Growth Platform

All bar one slide in the AGM presentation was positive in our view. We like the depth and width of the combined business offering, the building of recurring revenue streams, the effort being put into successful integration, and the opportunities we believe these will bring in the coming years. However, investor focus was on FY19 underlying EBIT guidance of $30-35m. It was the first comment on this year’s financial outlook, but below market expectations and further, relies on a stronger 2H. We expect a decent uplift in FY20 (although project delays detract from current, they add to future, performance). Despite the FY19 earnings miss, GCS is cheap compared to our blended valuation of $0.75. BUY.

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Gascoyne Resources (GCY) - AGM and Operational Update

Gascoyne Resources Logo Gascoyne Resources (GCY) held its Annual General Meeting today. Production quarter to date sits at 9.8koz Au (as of 26 Nov) with guidance now revised down to 17-18koz (19-22koz prior). Guidance was impacted by rain delays which restricted ore movements as well as downtime associated with the installation of new mill discharge grates and conveyor repairs. On a positive note, ore processing is now running at >3Mtpa (vs 2Mtpa in the prior Q) and mining has commenced at Gilbeys South, gradually replacing ore feed from Golden Wings which is providing less ore feed whilst the geological model is revised. A revised resource model for Gilbeys has resulted in 4% less ounces overall, but much tighter control on mineralisation which should provide confidence in future production.

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Pacific Energy (PEA) - Tracking Well

Pacific Energy LogoPEA provided an upgrade to expectations at an upbeat AGM last week, indicating the Company was on track to beat the $54-55m underlying EBITDA guidance provided in August. PEA’s ability to consistently meet, or beat, guidance is a key attraction of the business model; average contract length of ~4 years on take or pay terms offers visibility rarely seen in the cyclical mining services sector. The stock is undervalued and we maintain a BUY call on an unchanged $0.75 valuation.

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