Karoon Gas Australia Ltd

KAR Details

Expanding portfolio: Karoon Gas Australia Ltd.’s (ASX: KAR) stock surged 6.9% on September 26, 2017 along with the gains in energy sector driven by higher crude oil prices. Meanwhile, KAR made a strategic alliance with DEA, via agreements to review and evaluate and, jointly bid for oil and gas opportunities in selected areas in offshore Brazil. This includes potential farm-out of up to a 50% equity interest in Karoon’s five Santos Basin Blocks, including the Echidna and Kangaroo light oil discoveries. They also acquired permit EPP46 in the offshore Ceduna Sub-basin, Australia. KAR acquired Pacific’s 35% equity interest in the jointly held Santos Basin Blocks which comprises the Echidna, Kangaroo and Bilby oil discoveries for up to US$20.5 million. Their Pre-FEED was finished for the Echidna light oil discovery progressing the project to the next phase in the development pathway, being FEED. KAR stock corrected over 38.5% in the last six months placing them at lucrative levels. We give a “Buy” recommendation on the stock at the current price of $ 1.24 

Exploration portfolio (Source: Company reports)

Argosy Minerals Ltd

AGY Details

Progress on stage 2 development works at Rincon Lithium: Argosy Minerals Ltd.’s (ASX: AGY) stock has moved up 2.1% on September 26, 2017 and is touching its 52-week high price after surging about 586% in last three months (as at September 25, 2017). The group’s stage 2 development works at Rincon Lithium Project are progressing well with the commencement of drilling operations and construction of stage 2 evaporation ponds. Meanwhile, the group announced that Qianyun has requested an extension to the confirmatory due diligence period due to time being taken for receipt (and in some cases translation, etc.) of certain documents by their lawyers. Taking into consideration the progress that has been made so far and Qianyun’s reaffirmed commitment to the Company, Argosy has agreed to extend Qianyun’s limited confirmatory due diligence period up to 1 October 2017. The Placement Agreement remains conditional on Qianyun's limited confirmatory due diligence, Qianyun obtaining Chinese regulatory approvals to make the payments under the Placement Agreement and Preliminary Off-take Agreement, and Qianyun making the offtake prepayment of US$7.5 million under the terms of the Preliminary Off-take Agreement.

In August 2017, Argosy had entered into a binding investment and off-take agreements with this fast-growing Chinese battery company Qingdao Qianyun High-tech New Material Co. Ltd. Transaction included A$26.4M to be received upfront through an equity placement and prepayment under a 1-year preliminary off-take agreement upfront of A$26.4M exceeding Stage 2 development expenditure budget for the Rincon Lithium Project. Last week, AGY shares tumbled after the company extended the due diligence period of its investment and off-take agreement with Qingdao Qianyun. However, it seems some investors viewed the share fall as a buying opportunity as the stock surged up about 14% on September 25, 2017. Given the recent rally to high levels, we believe that the stock is now “Expensive” at the current price of $ 0.24

Saracen Mineral Holdings Ltd

SAR Details

Focusing on higher margin assets:Saracen Mineral Holdings Ltd.’s (ASX: SAR) stock moved up 3.01% on September 26, 2017 while the group announced about offloading high grade Red October Gold Mine and Project area to Matsa Resources (cash consideration for the binding agreement of $1 million with 4.545 million Matsa shares). The group aims to focus on its higher margin assets at Carosue Dam and Thunderbox. Their Karari mine showed ongoing strong results, from extensional as well as infill drilling. Whirling Dervish is expected to show first results in December quarter results in 2017. Given the volatile gold prices, Saracen is targeting to control their AISC to A$950/oz in FY20. SAR also enhanced their reserves by 486% in the last ten years while reserves increased by 40% to 2.1Moz in fiscal year of 2017. SAR stock generated over 28% returns in the last six months (as of September 25, 2017) and we believe the momentum in the stock would continue in the coming months. Based on the foregoing, we give a “Buy” recommendation on the stock at the current price of $ 1.36


Karari Mine (Source: Company reports) 

Mustang Resources Ltd

MUS Details

Targeting early cash flows: Mustang Resources Ltd.’s (ASX: MUS) stock slipped 3.5% on September 26, 2017 while the group reported that their small safe of low quality rubies has been stolen. However, the group reported that they are adequately covered by insurance while insurance claims would be lodged as soon as possible. The group is hosting a strong maiden rough ruby tender from 27 to 30 October 2017 to generate major early cash flows. They would reinvest portion of maiden tender proceeds for low cost scale up of their current processing plant and set up a further processing plant to achieve targeted 1 to 2 Mtpa processing capacity. They are aiming to enhance their ruby inventory to deliver at least two tenders in CY-2018 moving to minimum three per year from CY- 2019. The group is establishing a minimum 10-year JORC Compliant Resource via investing into aggressive auger drilling and pitting program post October 2017 tender. They are seeking options to grow landholding in world class Montepuez gem field to >400sqkm from 193sqkm. We maintain a “Hold” on the stock at the current price of $ 0.083

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