Latest Research

Swick Mining Services - Strategy evident in 2Q numbers

Swick Mining Services LogoSwicks 2Q19 margin was impressive. It continued the trend evident since the start of 2018, and demonstrates the success of SWK’s focus on extracting suitable returns at each of its projects. Our EBITDA forecasts are adjusted to reflect this, although partly offset by higher D&A charges. We are attracted to SWK’s production exposure, and think underground (U/G) drilling is a growth area given increasingly deeper and more complex orebodies. We maintain our $0.40 valuation (including $0.06 for Orexplore) and BUY call.

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Western Areas - December Quarter Results

Western Areas LogoWestern Areas delivered a steady December Q with production of 5.4kt Ni in concentrate at C1 cash costs of A$3.15/lb (before payability) in line with Argonaut’s forecast of 5.4kt at A$2.90/lb. An increase in cash costs QoQ, along with a 13% decline in the realised nickel price impacted operating cashflow. Cash and receivables declined $20.5m to $143.8m, after a $5.5m dividend payment and $18.7m capital for Odysseus development and studies. Argonaut maintains a BUY recommendation with a revised target price of $2.50.

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Regis Resources - Solid Dec Q production

Regis Resources LogoRegis Resources (RRL) reported solid Dec Q production of 90koz at an AISC of $985/oz (+6% on costs, production in-line). The result was in line with the previous Q, albeit with marginally higher costs largely as a result of higher strip ratio’s, lower milled tonnes and increased capex. 1HFY production of 181koz at AISC $954/oz is trending at the higher end of 340-370koz guidance and at the lower end of costs. Cashflow from operations of $76.4m was broadly in line with the Sept Q ($77.9m in Sept Q and vs Argonaut $67m) at a +3% higher gold price of A$1,718 (vs Sept Q received price of A$1,660/oz) which offset the higher cost of production. Production should improve further in the March Q as DSO throughput tonnages rebound post mill re-line work. BUY, TP $5.20ps.

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St Barbara - Approaching the March Q inflection point

St Barbara LogoSt Barbara (SBM) announced in-line Dec Q production of 89koz (-10% vs Sept Q) at an all in sustaining cost (AISC) of $1,108/oz (+21% vs Sept Q). Gwalia production of 53koz (-15% QoQ) was largely anticipated as a result of lower mined grades (-16% QoQ) and activities related to the Gwalia Extension Project (GEP) which impacted costs. Cash at bank increased by $7m to $357m after tax and growth capital payments of $59m. Simberi production of 36koz was unchanged QoQ, albeit with a marginally higher AISC of $1,146/oz (+7% QoQ) as a result of unplanned outages and a weaker FX. Guidance has been tightened at Gwalia and upgraded at Simberi thanks to high grade throughput. Full year group guidance now stands at 365-385koz (prior 350-375koz) at an AISC of $1,045- $1,100/oz. We view SBM as a high-quality gold miner with significant free cash generation, however the stock continues to trade above our valuation. We await the outcome of the Gwalia Mass Extraction (GMX) and Simberi sulphide studies due in the March Q for direction on future growth, at which point we will revise our forecasts. HOLD recommendation maintained and target price to $4.15ps (prior $4.12ps).

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Northern Star Resources - Taking the wind out of the sails

Northern Star Resources LogoNorthern Star (NST) delivered a weaker Dec Q with production of 214koz at an elevated AISC of $1,365/oz (-6% on production, +11% on costs, vs Sept Q 208koz @ AISC $1,226/oz). The result was impacted largely as a result of lower production at Jundee and higher costs across the board. Net cash increased to $292m (+5% vs Sept). Mined and milled tonnes rose by 3%/7% respectively. FY19 guidance has been maintained at 850-900koz, however full year cost guidance has increased to $1,125- $1,225/oz, reflecting up front capital investment at Pogo and NST’s mining for margin strategy of lower grade ores in a higher gold price environment. A strong 2HFY19 rebound is highly likely at Pogo, but the stock’s premium trading metrics appear to be less justified after what we feel was a subdued performance. HOLD maintained.

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