Latest Research

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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GR Engineering (GNG) - AGM Guidance

GR Engineering LogoFull year revenue guidance provided at today’s AGM was close to expectation, however we have pared back our full year forecast given 1H19 expected weakness. There is still some uncertainty with regard to key project timing in FY19, but if Thunderbird progresses it will significantly bolster FY20 and FY21. We retain a positive view and a $1.55 valuation that takes into account the longer term outlook and value. BUY.

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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.

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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.

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