With the retreat in oil and iron ore prices, many energy and resource stocks were seen to plunge on May 28, 2018. Oil prices lost their momentum as Saudi Arabia and Russia have revealed to enhance oil supply, while iron ore prices are struggling with inventory-related and China supply-related issues. A drop- in gold prices was seen to impact gold stocks.

Independence Group NL

IGO Details
Divesting Jaguar Asset:Independence Group NL (ASX: IGO) has entered into an agreement for the sale of its Jaguar Operation to CopperChem for the total consideration of $73.2 Mn. The objective of this sale is to concentrate on energy storage minerals business division. As a result of this, the group has now strategic focus on high-quality assets with scale and longevity which are aligned to the emerging super-cycle for energy storage minerals. On the transaction front, the group will obtain $25 Mn in cash when the deal settles on May 31, 2018 with CopperChem Limited and further, they will receive other three equal instalments of A$16.06 Mn annually on the anniversary of the completion date. During the transition period, IGO will assist CopperChem throughout the ownership transition process to ensure safety and would maintain with minimal disruption to production as well as to provide support to employees and contractors. All IGO’s existing community programs and investments will be maintained to the end of their contractual periods. We expect that this decision will enable IGO to stick with its core competencies i.e., nickel and gold mining, going forward. Besides this, the extra cash will support to strengthen its balance sheet.


Q3FY18 Financial Highlights (Source: Company Reports)

While the stock price has been up 37.72% in the past one year, it declined by 10.29% in past one month as at May 25, 2018. Hence, we maintain our “Hold” recommendation on the stock at the current market price of $ 4.7, considering balance sheet position as focus shifts from construction to delivery and discovery which indicates potentiality of the business in longer run.
 

IGO Daily Chart (Source: Thomson Reuters)
 

Resolute Mining Limited

RSG Details

Footprint expansion in African Market:Resolute Mining Limited (ASX: RSG) informed the market that it has agreed to subscribe for 32.4 million new shares in Canadian company, Orca Gold Inc through a share placement event, priced at C$0.675 per share. A subscription agreement between the company and Orca plots an investment by the Company of A$22.5 Mn for a 15% stake in Orca Gold. According to the agreement, the placement will consist of two tranches with consideration split between cash and Resolute shares wherein one tranche issues of 1.6 Million shares in Orca is expected to complete prior to 30 May 2018 with consideration of approximately C$10.9 million ($A11.3m) and other tranche issues of remaining shares in Orca expected to complete in the mid of July month this year with the consideration of C$10.9 million. Furthermore, Resolute has the right to appoint a director to the Board of Orca following completion of tranche 2.


Resolute’s Footprint in Africa Region (Source: Company Reports)
 
The Group has acquired an initial stake in Orca and intends to closely collaborate with their management team on further exploration and development activity. The investment in Orca represents a strategic stake and development opportunity, and expands its potential project pipeline while providing a source of medium-term potential growth opportunity. In addition to this, both companies have agreed to collaborate on the identification and development of orebodies in Africa which will help to grow topline growth of RSG in years to come. Based on this opportunity for a potential large-scale, low-cost, long-life gold mine and other project pipelines, we maintain our “Buy” recommendation” on the stock at the current market price of $1.165, though down 1.3% on May 28, 2018.
 

RSG Daily Chart (Source: Thomson Reuters)
 

Karoon Gas Australia Limited

KAR Details

ANP approves Neon (Echidna) and Goia (Kangaroo) Declaration of Commerciality: Down 2% on May 28, 2018, Karoon (ASX: KAR) has recently received ANP approval of the Final Discovery Evaluation Report (RFAD) for wholly owned Santos Blocks S-M-1037, S-M-1101, S-M-1102, S-M-1165 and S-M-1166 along with a Declaration of Commerciality (DoC). KAR submitted the RFAD and DoC documents in early May to the Brazilian oil and gas regulator i.e., Agência Nacional do Petróleo, Gás Natural e Biocombustíveis (ANP) wherein these documents outline two distinct areas identified for retention which include the Echidna and Kangaroo oil accumulations along with some near field prospective resource opportunities. Further, the RFAD and DoC approval from the ANP mark the end of the exploratory phase and the beginning of the development and production phase. The group noted that, while approval marks the start of the development and production phase, this does not constitute a final investment decision (FID). Following this, FID will be assessed by Karoon independently of these approvals and Karoon is expected to be a in position to decide on FID later in 2018.


Oil discoveries (Source: Company Reports)

Besides this, Karoon Gas Australia Ltd has revised its estimates of Contingent Resources in its Brazil Echidna and Kangaroo oil fields and Prospective Resources in Peru block Z-38 and Australian block WA-482-P due to new data analysis and interpretation. Gross (100%) ‘Best’ case Prospective Resources are estimated at over 1.3 billion barrels on an un-risked basis. The revised estimates, although lower than previously reported estimates, have lower geological risk and were critical to securing Tullow as a farm-in partner in February 2018 ahead of drilling in 2019. The group had cash balance of $329 Mn as at March 31, 2018. As of now, we give a “Buy” recommendation on the stock at the current market price of $ 1.120, based on ongoing exploration strategy and its development activities indicating growth prospect.
 

KAR Daily Chart (Source: Thomson Reuters)
 

Beach Energy Limited

BPT Details

Revised FY18 Guidance for Production and Capital Expenditure:Beach Energy Limited (ASX: BPT) delivered strong set of third quarter results wherein total sales volume grew by 143% as compared to previous corresponding period and revenue growth of 89% to $133 Mn in Q3FY18 was reported. This sales volumes and revenue spiked up due to the contribution of the newly acquired assets. As a result of this, net gearing ratio reduces to 29% at the end of March 2018.The group remains on track to meet the synergy target of $50 million per annum by the end of FY19. The company has also tightened the FY18 guidance of pro forma production to 26.0 – 27.0 MMboe (from 25.5 – 27.6 MMboe). Additionally, the company has also tightened the FY18 guidance of Pro forma capital expenditure to $370 – 400 million (from $405 – 455 million).

 
Q3 FY18 Financial Highlights (Source: Company Reports)

Besides this, the group has appointed Sheree Ford as Company Secretary and General Counsel on an interim basis while Cathy Oster has resigned as Company Secretary, effective 1 May 2018. While the stock has risen 162.85% in past one year as on May 25, 2018 but declined by 4.44% in past five days due to commodity price movement and a mixed view on the performance and capital expenditure. Hence, we maintain our “Expensive” recommendation on the stock at the current price of $ 1.555. The stock was seen to nose dive by 9.6% on May 28, 2018.
 

BPT Daily Chart (Source: Thomson Reuters)

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.