Western Areas Ltd

Strong December Quarter performance: Western Areas Ltd.’s (ASX: WSA) stock rose 4.7% on January 25, 2018 after the company announced about December quarter increased production, steady cash costs and improved nickel pricing that generated positive operating cash flow of $22.1m, compared to $9.5m in the prior quarter. The total cash and receivables (A$146.5m) is flat quarter on quarter after the payment of the final dividend (A$5.5m) in FY17 and capital investment in the Mill Recovery Enhancement Project of A$5.5m. In the December quarter, WSA’s production has increased from the September quarter and the mill achieved record quarterly throughput of 161,218 tonnes of ore. This is due to the increased throughput of low grade fines (24,402t @ 1.4% nickel) from the recent ore sorter project. Moreover, the ongoing Odysseus DFS work has delivered a number of positive outcomes, and a larger project and longer mines life is now expected. Overall, the company is on track to meet its full year guidance metrics. Meanwhile, WSA stock has risen 8.50% in three months as on January 24, 2018, and we give a “Hold” recommendation on the stock at the current price of $3.34
 

Production Overview (Source: Company Reports)
 

Whitehaven Coal Ltd

Saleable coal production guidance for FY18 has been reduced:Whitehaven Coal Ltd.’s (ASX: WHC) stock surged 3.3% on January 25, 2018 and has risen 29.79% in three months as on January 24, 2018 as the thermal coal prices during the December quarter remained strong and exceeded the analysts’ expectations. The Hard-coking coal prices were also strong, however, the potential for weather related disruptions in Queensland in the next two quarters is expected to result in continued price volatility. Moreover, in the December quarter, the Managed coal sales, including sales of purchased coal, increased 10% to 5.8Mt on the previous corresponding period. The increased proportion of low CV thermal was due to strong sales from Werris Creek, however some fault had impacted coal from Narrabri. The coal production at Narrabri during the December quarter was affected by changing roof conditions that required additional secondary roof support to be installed. As a result, during the December quarter, the labour was diverted from production to address the impacts of increased weighting and installation of additional secondary support in existing roadways leading to a reduction in longwall production in December. Additionally, due to Narrabri during the December quarter, the saleable coal production guidance for FY 18 has been reduced to the range of 20.5Mt to 21.0Mt (100% basis). Looking at the trading conditions and FY18 challenges, we give an “Expensive” recommendation on the stock at the current price of $4.71
 

Production & Sales Highlights (Source: Company Reports)
 

Resolute Mining Ltd

New A$ gold hedge implemented: With the latest US dollar tremble, gold prices moved to the highest level seen in the last one and a half years at the back of US Treasury secretary commenting on preference of a weaker currency. This led Resolute Mining Ltd (ASX: RSG) to witness a stock price rise of 5.78% on January 25, 2018. The group has been known to exceed its production guidance over the last three years. RSG had taken advantage of the recent increase in the A$ gold price to form a gold hedge position to support the Ravenswood Expansion Project. The company had forward sold 72,000 ounces of gold at an average price of A$1,715 per ounce with scheduled monthly deliveries of 4,000 ounces between December 2017 and May 2019. RSG has received an average gold price in the forward sales contracts of A$1,715 per ounce, which is a significant premium above RSG’s budgeted gold price of A$1,600 per ounce. Overall, combined with RSG’s existing US$ forward contracts, the group’s total hedged position is approximately 30% of expected gold production over the next 18 months. As a result, RSG stock has risen 6.13% in three months as on January 24, 2018 and is trading at a very low P/E. We give a “Buy” recommendation on the stock at the current price of $1.19

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