Latest Research

Gascoyne Resources (GCY) - Dec Q Production

Gascoyne Resources LogoGCY has released its Dec Q report. Much of the information was flagged in the operational update in late Dec. Production came in slightly below guidance as a result of a number of factors which contributed to lower ore availability. The March Q will continue to be a hard grind for GCY, but many of the issues which plagued the operation in late 2018 should be largely mitigated near term. We maintain our Spec Buy recommendation and revise our target price to $0.23ps after accounting for the recent $12m NRW working capital loan.

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Independence Group (IGO) - Breakout Quarter

Independence Group LogoIndependence Group (IGO) reported a stellar December Q with record production at both Nova and Tropicana. Nova produced 7.6kt Ni and 3.5kt Cu in concentrate at A$1.94/lb cash costs (+11% Ni, +15% Cu and -30% on costs QoQ). Tropicana produced 136.9koz gold at an AISC of A$848/lb (+9% gold and -18% on costs). Net cash increased 52% QoQ to $93.8m. Both assets are tracking well within guidance. IGO also reported H1 FY19 financials with $353.4m revenue, $130.5m underlying EBITDA and a $0.9m net profit. IGO declared a $2c/sh interim dividend payable 1 March 2019. In December, the Company released a PFS for the Boston Shaker underground mine. This development has the potential to maintain higher mill feed grades for longer and extend Tropicana’s mine life. The underground is estimated to produce 100kozpa for 7-years with $95m upfront capex.

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Fortescue Metals (FMG) - The Vale Effect

Fortescue metals LogoFortescue Metals (FMG) reported Sept Q results with 42.5Mt shipped at a C1 cost of US$13.02/wmt (+6% on production, -1% on costs QoQ). Strip ratios decreased to 1.5:1 (from 1.6:1) as overburden removal decreased -15% after an inventory increase in Q1 which saw higher stripping. Gross debt remained at US$4.0bn (unch) and cash was largely unchanged at US$962m. The average received price of US$48/dmt implied a price realisation gap to the Platts 62 CFR of 33% (unch QoQ). Shipments of the first West Pilbara Fines commenced in December and the share buyback has completed ~28% of its total target. The advent of shipping higher-grade West Pilbara ores against the backdrop of perceived supply disruption from Vale will be a net positive for FMG near term but longer-term macro headwinds continue to prevail. HOLD maintained and target price of $4.92ps.

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Doray Minerals (DRM) - December Q Production

Doray Minerals LogoDoray Minerals (DRM) reported Dec Q production from its Deflector Mine with 19koz Au and 660t Cu at an all-in sustaining cost (AISC) of A$1,354/oz (versus 19.75koz @ A$1,251/oz in the Sept Q). FY19 copper and gold production is tracking well to achieve stated guidance of 80-85koz at an AISC of A$1,050-1,150/oz. Stoping of the Link Lode commenced in the low-grade areas so the full benefit of high-grade ores won’t be seen until the 2H as mining moves into higher-grade zones. Mill throughput was -8% QoQ due to a mill reline as well as mining delays due to an underground fire. Cash and equivalents fell to $21.6m, reflecting further repayments in debt which has been reduced to $9.5m (-$5.7m QoQ). DRM trades on appealing metrics of ~3x FY19 EV/EBITDA and the near-term merger with SLR is appealing for a stronger balance sheet flexibility, production growth and the removal of single asset risk. BUY maintained and target price of $0.47ps.

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Otto Energy (OEL) - Quarterly Report - 31 December 2019

Otto Energy LogoOEL released its quarterly result, and we highlight the weaker near-term cash flows due to the lower received oil price. The short-term cash flow impacts have affected our price target and as a result it has dropped to $0.09/share. We maintain our Buy recommendation but are cautious on potential near term funding challenges if the pace of expenditure is maintained and oil prices do not recover.

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