Six basic material stocks under the radar

Iluka Resources Limited

ILU Details
Production for nine months is as per the guidance: Iluka Resources Limited (ASX: ILU) has confirmed the appointment of Tom O’Leary, the CEO of ILU as the Managing Director. The group’s September year-to-date production delivered 526.4 thousand tonnes of zircon/rutile/synthetic rutile (Z/R/SR) which is higher by 10.8% as compared to the corresponding year-to-date level of 475.1 thousand tonnes. The higher nine months’ production is due to the higher synthetic rutile production after the re-activation of SR kiln 2 in March 2015. This is as per ILU’s guidance of Z/R/SR production of about 660 thousand tonnes for the full year.

 

Quarterly Production Report as at 30^th September 2016 (Source: Company Reports)
 
Therefore, the year-to-date zircon/rutile/synthetic rutile (Z/R/SR) sales reached 451.6 thousand tonnes, and resulted in growth of 8.8 per cent over the corresponding period of 2015 due to the higher synthetic rutile and rutile sales which otherwise were partially offset by lower zircon sales. On the other hand, the total mineral sands revenue slipped 11.8%. Trading at a decent dividend yield, we give a “Hold” recommendation on the stock at the current price of $ 5.59

 
ILU Daily Chart (Source: Thomson Reuters)

OZ Minerals Limited

OZL Details
Joint Venture Agreement with Cassini Resources: OZ Minerals Limited (ASX: OZL) had signed a Joint Venture Agreement with Cassini Resources (ASX: CZI) to earn up to 70% of the West Musgrave Project. OZL started $3 million scoping study of the West Musgrave copper and nickel deposits in West Australia, which is expected to be finished by September 2017. The drilling is scheduled to begin in the first week of November. CZI has already commenced the work programs with OZL on the project. Moreover, the full production at OZL’s Prominent Hill mine has resumed after the restoration of grid power to the site. On the other hand, OZL has withdrawn from its Jamaican exploration joint ventures at Bellas Gate and Rodinia as the drill intersected grades but did not indicate the types of deposits OZL was looking for.

 

Financial Performance for 1H 2016 (Source: Company Reports)
 
OZL will therefore transfer all of its Jamaican exploration interests to Canadian based Carube Copper Corp. Meanwhile, OZL stock rose 9.70% in the last six months (as of October 18, 2016). Accordingly, we give a “Hold” recommendation on the stock at the current price of $ 5.86

 
OZL Daily Chart (Source: Thomson Reuters) 

BC Iron Limited

BCI Details
Raising funds to develop Buckland mine-to-port project: BC Iron Limited (ASX: BCI) has recently announced for the raising of $25.5 million before costs through a pro-rata renounceable entitlement offer for developing Buckland mine-to-port project. Moreover, BCI has entered a binding terms sheet for the sale of its 75% interest in the Nullagine Joint Venture (NJV) to a subsidiary of Fortescue Metals Group Limited. This transaction would eliminate BCI's ongoing holding costs and tenement commitments, and the existing environmental rehabilitation liability. Additionally, Pilbara Ports Authority has approved a 12-months extension to the deadline for BC Iron to satisfy (or waive) conditions for the development of the Cape Preston East port for the integrated Buckland Project. As per its management team highlights, BCI’s Chief Executive Officer, Mr Alwyn Vorster, had been appointed as the Managing Director. BCI stock rose 6.25% in the last three months (as of October 18, 2016) and we give a “Hold” recommendation on the stock at the current price of $ 0.18

 
BCI Daily Chart (Source: Thomson Reuters) 

Fortescue Metals Group Limited

 

FMG Details
Agreement with BC Iron for 75% interest in the Nullagine Joint Venture: Fortescue Metals Group Limited (ASX: FMG) and BC Iron have entered a binding term sheet for the sale of BCI’s 75% interest in the Nullagine Joint Venture to a subsidiary of FMG. Further, FMG is to pay an ongoing royalty on the future iron ore mined from the Nullagine tenements. However, the future royalty payment would initially be partly waived by BC Iron up to an agreed fixed amount to offset the obligations assumed by FMG as part of the transaction (including the rehabilitation). The deal would add 6 million tonnes to FMG’s annual iron ore capacity enabling them to enhance the production to the target range of 165-170 million tonnes in the FY 17. Moreover, FMG has issued a US$700 million repayment notice for the 2019 Senior Secured Credit Facility, which is a Term Loan. Meanwhile, FMG stock rose 64.95% in six months (as of October 18, 2016), and still trading at a reasonable P/E. We give a “Hold” recommendation on the stock at the current price of $ 5.15

 
FMG Daily Chart (Source: Thomson Reuters) 

BlueScope Steel Limited

BSL Details
Strong Financial performance of FY 16: BlueScope Steel Limited (ASX: BSL) reported a 119% growth in the underlying NPAT of $293.1 million in FY 16 and 89% growth in the underlying EBIT to $570.5 million driven by the group’s sales growth, cost reductions and the benefit of the North Star acquisition. Moreover, BSL expects their underlying EBIT to be around 50 per cent higher for first half of 2017 as compared to the second half of FY16 underlying EBIT which was $340.4 million. The 1H FY17 underlying net finance cost is expected to be lower than 2H FY16 due to the lower average borrowings, while the underlying tax rate IS expected to be slightly higher. The profit attributable to non-controlling interests will be like that of 2H FY2016.

 

FY 16 Financial Performance (Source: Company Reports)
 
The group will conduct its AGM on November 10, 2016. Meanwhile, BSL stock rose 17.27% in the last six months (as of October 18, 2016).  Accordingly, we give a “Hold” recommendation on the stock at the current price of $ 7.68 

 
BSL Daily Chart (Source: Thomson Reuters)

Boral Limited

BLD Details
Subdued FY 16 Financial Performance: Boral Limited (ASX: BLD) has confirmed that it had obtained merger clearance from the US Federal Trade Commission for the North American Bricks Joint Venture with Forterra Brick. The merger is expected to finish on or before 30^th November 2016.

 

FY 16 Financial Performance (Source: Company Reports)
 
On the other hand, BLD has reported a 2% fall in the revenue to $4.3 billion in FY 16 and the net profit after tax has been flat at $256 million. Meanwhile, BLD stock is trading at a slightly higher P/E while we maintain our “Expensive” recommendation on the stock at the current price of $ 6.76

 
BLD Daily Chart (Source: Thomson Reuters)

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