Grange Resources Limited

Understanding GRR’s December 2018 Quarter Report: Grange Resources Limited (ASX: GRR) had come forward and made an announcement about the results for the December 2018 quarter. The company had stated that its mining movements have witnessed a rise in the fourth quarter after the dewatering from North Pit. Moreover, the company had also restored the main ore zone access. The company had witnessed a rise in the cash and liquid investments in the December 2018 quarter as compared to the previous quarter. The company’s cash and liquid investments at the end of the December 2018 quarter stood at A$224.49 million while, at the end of September 2018 quarter, cash and liquid investments stood at A$209.28 million. The rise in the cash and liquid investments reflects that the company is in the better position to meet its short-term obligations and to fund the growth prospects. However, at the end of the December 2018 quarter, its trade receivables were A$18.38 million and, at the end of the September 2018 quarter, the trade receivables were A$24.46 million, reflecting better management policy towards its collection procedure.
In the December 2018 quarter, the company’s pellet production encountered a rise as compared to the previous quarter to 517kt. In the September 2018 quarter, the Pellet production was 437kt.

Savage River Operations: Production (Source: Company Reports)

The company’s unit cash operating cost has witnessed a decline in the December 2018 quarter as compared to the September 2018 quarter. Its unit cash operating cost has declined from A$148.15/t (September 2018 quarter) to A$101.32/t primarily because of a rise in the concentrate production. The company ended December 2018 quarter with concentrate production of 524kt while it concluded September 2018 quarter with concentrate production of 399kt because the company regained access to ore.

Higher than Industry Median Margins: Grange Resources Limited happens to be in the decent position from the margins perspective as its key margins are higher than the industry medians which might continue in years to come. The company’s EBITDA margin stood at 47.5% at the end of June 2018 while the industry median is at 39.8%. The company’s net margin stood at 35.5% at the end of June 2018 as compared to the industry median of 14%.

Moreover, the company is expected to be benefited by its robust current ratio. At the end of June 2018, the company’s current ratio stood at 6.23x while the industry median happens to be 2.02x.

Stock Recommendation: On the daily chart of Grange Resources, Exponential Moving Average or EMA has been applied and default values were used for the purposes. As per the observation, the stock price has crossed the EMA and is trending in the downward direction. Moreover, the company’s stock price is trading slightly towards the higher level and it can be assumed that the positive factors helping the company have already been discounted in the current market price.

Therefore, we advise that the market players need to closely watch the stock at the current market price of A$0.205 (down 4.651% on 23 January 2019) and wait for the better entry level.
 

Beadell Resources Limited

BDR Gave Term Loan Update: Beadell Resources Limited (ASX: BDR) had recently provided an update related to Great Panther Silver Limited US$5 million non-revolving term loan. Beadell had stated that, with respect to the loan agreement, Great Panther Silver Limited happens to possess prepayment right of the outstanding principal loan’s balance from the proceed of PIS and COFINS tax refunds. The release also stated that the Beadell got a receipt of BRL$37.9 million or US$10.3 million of COFINS it also stated that Great Panther Silver Limited would be taking the partial repayment amounting to US$3 million of principal loan amount including the interest as well as fees accrued to date.

The release dated January 14, 2019 also stated that Great Panther Silver Limited would also be extending maturity date with regards to the balance US$2 million to March 18, 2019 so that Beadell can have additional money which it can use towards general working capital as well as operating requirements. Overall, the arrangement looks to be a favorable one.

Recently, the company posted September 2018 quarterly report in which it stated that the cash costs for the period amounted to US$899 per ounce. The company stated that its AISC (or All-in Sustaining Costs) amounted to US$962 per ounce in the quarter ended September 2018.

Look at AISC (Source: Company Reports)

Expected Deployments of The Raised Capital: In the report related to the half year ended June 30, 2018, the company had stated that it had managed to garner $11.8 million before costs. There are expectations that the company would be deploying the funds primarily for the working capital purposes as well as for general corporate purposes. 

Additionally, the company is expected to be benefited by the improvement in the key margins. At the end of June 2018, the company’s gross margins stood at -3.8% which implies an improvement of 25.7% on the YoY basis. Moreover, the company’s EBITDA margin has also witnessed the YoY improvement of 30.3% to 4.5% (at the end of June 2018).

Stock Recommendation: On the daily chart of Beadell Resources, Exponential Moving Average or EMA has been applied and default values were used for the purposes. As per the observation, the stock price is close to EMA and soon a crossover might occur. However, this crossover has not taken place till now. If the crossover occurs, the stock price might witness an upward momentum. Based on foregoing, we maintain our “Hold” rating on the stock at the current market price of A$0.051 per share (up 2% on 23 January 2019).
 
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