Western Areas Ltd

WSA Details
 
Support from rise in Nickel Price: Western Areas Ltd.’s (ASX:WSA) stock has risen 30.99% in last six months as on October 31, 2017finding support from rising nickel price. The stock further surged about 3.2% on November 01, 2017 after the overnight rise of the nickel price owing to bullish stance on the metal due to its use in electric vehicles’ batteries. Meanwhile, WSA in the September quarter reported that the nickel market has shown positive growth signs due to the Chinese stainless-steel demand and EV market growth. The nickel price had improved lately in the September quarter, and the bulk of that price improvement will be received by WSA in the December quarter due to the structure of nickel offtake contracts. Moreover, WSA’s significant growth project in FY18, which is the Mill Recovery Enhancement Project (MREP), is progressing well with construction proceeding on time and on budget, and commissioning scheduled for the March quarter.
 

New Morning Open Pit (Source: Company Reports)
 
Due to the 45-50% nickel grade product specification, WSA is getting significant demand for this uncontracted product mainly from participants in the EV battery market. The company in the September quarter has generated positive operating cashflow of A$9.5m; and with cash and receivables of A$146.8m, WSA is well placed to fund current growth ambitions through the MREP, Odysseus and New Morning Projects. We give a “Hold” recommendation on the stock at the current price of $2.88



WSA Daily Chart (Source: Thomson Reuters)
 

Independence Group NL

IGO Details

Strong demand for commodities:Independence Group NL (ASX:IGO) rose 3.99% on November 01, 2017 due to the commodity price movement and the expectation of an emanating strong demand for sulphate. IGOlike WSA has been looking at opportunities to convert nickel into a powder-like sulfate for use in electric vehicle batteries .After a slow start, the production ramp up at Nova is also seen to exceed expectations while Tropicana Long Island study might cap the uncertainty over the medium-term outlook.

Given the current efforts, IGO’s first quarter of FY18 was reported to be a successful maiden quarter of commercial production from Nova with nickel production and cash costs within guidance.
 

Production Summary for 1Q FY18 (Source: Company Reports)
 
The activities in Nova are at a steady state level now and are expected to be at nameplate 1.5Mtpa rate in the second quarter of FY18. Moreover, IGO has made the first term debt repayment of A$29M and net debt is now at A$142M. IGO had posted the unaudited underlying EBITDA and cash flow from operating activities at A$69M and A$61M, respectively, for 1Q FY18. Meanwhile, the stock has risen 25.7% in last six months as on October 31, 2017. We give a “Buy” recommendation on the stock at the current price of $4.17



IGO Daily Chart (Source: Thomson Reuters)
 

South32 Ltd

S32 Details

Maintained the annual production guidance:South32 Ltd (ASX:S32)has been up till now benefitting from commodity price movements; and outside commodity prices, M&A can be the next catalyst to drive growth. In the September quarter, S32 delivered a US$33M increase in the net cash position to US$1.7B at the back of better commodity prices. The company has maintained the annual production guidance for the operations and has confirmed that it will operate one longwall at the Illawarra Metallurgical Coal Appin mine across the remainder of FY18. S32 has achieved record quarterly production at Mozal Aluminium and strong performance at the alumina refineries despite bauxite supply being impacted by adverse weather in Western Australia and Brazil. Moreover, in the September quarter, S32 increased its payable nickel production at Cerro Matoso by 21% as scheduled maintenance was deferred and the average ore grade benefitted from the ramp-up of La Esmeralda.
 
 

Production Summary for 1Q FY 18 (Source: Company Reports)
 
The company has continued to take advantage of strong market conditions by maintaining South Africa Manganese ore sales at an annualised rate of 3.5Mwmt pa (100% basis). Meanwhile, S32 stock has risen 23.9% in the last six months as on October 31, 2017 and was up 3.8% on November 01, 2017. Given the trading scenario, we put a “Hold” recommendation on the stock at the current price of $3.50



S32Daily Chart (Source: Thomson Reuters)
 

Beach Energy Ltd

BPT Details

Progress at Development and Exploration Projects: Beach Energy Ltd (ASX:BPT)has reported for a new gas discovery at Lowry-1 that validates phase 1 expansion of the Middleton facility from 25 MMscfd to 40 MMscfd. Further, gas drilling success at Crawford-1 has confirmedextension of the Brownlow Field with reserve additions as expected. BPT has also reported for commencement of third Cooper Basin JV drilling rig with success at the Namur-5 gas appraisal well. In the September quarter, BPT reported for a 17% increase in the sales revenue to $178 million over the prior quarter, mainly due to a 12% increase in the average realised Australian dollar oil price to about $78/bbl, and a 9% increase in oil sales volumes. The production for the quarter was up 2% at 2.6 million barrels.
 

Key Statistics (Beach standalone) for 1Q FY 18 (Source: Company Reports)
 
Moreover, BPT is acquiring Lattice Energy, which is a transformational move for Beach, that will significantly enhance the company’s scale and create a leading ASX-listed upstream oil and gas mid-cap with diversity of production and growth options. The deal will expand Beach’s footprint across multiple basins, production hubs and jurisdictions, and increase BPT’s 2P reserves by ~200% to 232 MMboe and FY18 pro forma production guidance by ~150% to 25-27 MMboe. The acquisition is subject to approvals from the New Zealand Overseas Investment Office and New Zealand Minister of Energy and Resources. Meanwhile, BPT stock has risen 45.71% in three months as on October 31, 2017 and surged 7.7% on November 01, 2017. Trading at high levels, we give a “Hold” on the stock at the current price of $1.05



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.