Latest Research

GR Engineering (GNG) - Thunderbird EPC Contract

GR Engineering LogoAfter a long gestation period, GNG has been awarded a $366m EPC contract with Sheffield Resources (SFX) for the Thunderbird Mineral Sands Project in north-west WA. The project still requires financing and FID, but at this stage construction is expected to kick off in 2Q 2019. We have pulled back FY19 forecasts given some uncertainty over revenue timing, but note that if SFX goes ahead, slippage out of FY19 buffers FY20 and FY21. Our positive view is unchanged, and our retained $1.55 valuation reflects longer term value. BUY.

read more...

Australian Gold Sector - September Quarter Review

Argonaut Limited LogoGold prices fell by -2.4% in AUD terms and -4% in USD terms in the Sept Q. The ASX Small Resources (XSR) index has fallen by -9% FY19 YTD and the ASX Gold Index (XGD) is down by -2.6% FY19YTD. Funds flow has focused largely on the bigger miners with investors pulling away from small explorers and emerging developers. This shouldn’t come as a surprise given increased short positions in gold, increased demand for US dollars and a rise in US bond yields. Despite the weak macro, Aussie miners still outperformed their US counterparts by ~20% on costs. We pull apart the Sept Q production reports and identify new ideas in the gold sector.

read more...

Sovereign Metals (SVM) - PFS Confirms Strong Margins

Sovereign Metals LogoSovereign Metals (SVM) released a Pre-Feasibility Study (PFS) for its 100% owned Malingunde graphite project in Malawi. Malingunde is a rare high grade saprolite deposit, with low strip ratios, free digging and minimal crushing resulting in low operating and capital costs. SVM forecast’s FOB cash costs delivered to Nacala Port in Mozambique average US$323/t (per tonne concentrate) life of mine (LOM). Capital costs are also low, estimated at US$49m. While Malawi is a land locked country, the project has access to port via a recently refurbished rail line with excess capacity. Argonaut maintains a SPEC BUY recommendation with a target price of $0.16.

read more...

Gascoyne Resources (GCY) - Company Update - Target Price Updated

Gascoyne Resources LogoGascoyne Resources (GCY) recently announced Board changes which saw the departure of the Managing Director and the newly appointed Chairman. The stock was severely sold off as a result of this and the disappointing Sept Q production report. We recently met with the new management to flesh out the recent developments and how these might be rectified going forward. A number of issues have arisen which have caused a cascading effect to lower production and cashflow which is critical in the early stages of any mining project. We do see many of these issues as being mitigated over coming months which is a key positive. Argonaut views the share price at current levels presents a significant, albeit risky opportunity. Our modelling reflects a heavy discount to account for production risk going forward, but still implies a ~70% upside to the current share price. Speculative Buy.

read more...

Ausdrill Limited (ASL) - Edikan Clouds The Bigger Picture

Ausdrill Limited LogoThe Barminco acquisition has completed, although the loss of the Edikan contract caught us by surprise. But focussing solely on this loss risks missing the bigger picture in our view. With at least 30 other mining and production drilling contracts across the group, ASL is bigger than one mine site. Other contracts have been extended and pipeline opportunities remain. We like the Barminco acquisition and maintain a BUY call on a revised blended valuation of $2.25 (prior $2.40).

read more...