Stocks’ Details

Regis Resources Limited

RRL’s Share Tumbled Over 11% On July 24, 2019:Regis Resources Limited (ASX: RRL) has an engagement in the production of gold from the Duketon Gold project; exploration, evaluation and development of gold projects in the Eastern Goldfields of Western Australia; and exploration and evaluation of the McPhillamys Gold project in New South Wales. The company recently published June ’19 Quarter report where it highlighted that its annual production stood at 363,418 ounces at the top end of annual guidance with All-In Sustaining cost (ASIC) of $1,029 per ounce at around mid-point of the guidance range. Group Ore reserves as on March 31, 2019 stood at 4.03Moz, which is an increase of 8% after accounting for mining depletion during the year. The quarterly gold production stood at 90,966 oz. Around 106,628 ounces of gold sold at an average price of $1,832 per ounce during the quarter. Pre-royalty cash cost for the quarter stood at $949 per ounce and AISC of $1,189 per ounce as compared to cash cost of $767 per ounce and AISC of $1,019 per ounce in the previous quarter.


Operating results for the June 2019 quarter (Source: Company Reports)

What to expect:As per the report, the company is expecting another strong year of operations at the Duketon Gold project in FY20 with gold production guidance of 340,000-370,000 oz at an AISC range of $1,125-$1,195 per ounce. With the increase in high grade material from the Rosemont underground and currently planned open pits, gold production over the next 3 years is expected to lift, by around 10% above the current level by FY22.
Stock Recommendation: The share price of the company tumbled 11.747% on 24 July 2019 over the downgrading its recommendation by some brokerage houses. According to them, the potential has been alleged that even the company’s production was in line with the expectations, its costs were higher than forecast. With respect to the stock performance, the share price of the company has risen 34.51% in the past three months as at 23 July 2019 and is priced close to its 52-week high level of $6.720 with PE multiple of 19.56x. Moreover, its Price/Cashflow for TTM stand at 13.4x, which is higher than the industry median of 4.7x. Hence, considering the aforesaid facts and current trading level, we recommend investors to avoid the stock at the current market price of $5.710 (down 11.747% on July 24, 2019).

Independence Group NL

Decent Top-Line and Bottom-Line Growth:Independence Group NL (ASX: IGO) is engaged in the mining and processing of nickel, copper, cobalt, gold, zinc and silver. Recently, Legend Mining Limited announced that the ASX has granted it a waiver from ASX Listing Rule 6.18 with respect to the anti-dilution right granted to Independence Group NL (IGO) pursuant to the Subscription Agreement announced to ASX on 9 July 2019 where IGO agreed to subscribe for $9.8 Mn in two tranches. Tranche 1 was completed on 11 July 2019 and Tranche 2 is subject to the shareholder approval at the general meeting, which is expected to be held in October 2019.In another update, Prodigy Gold NL (ASX: PRX) announced that reverse circulation drill holes completed at the Lake Mackay Project (IGO 70%; PRX 30%) in the Northern Territory, has intercepted more copper and cobalt along with new prospects.
In another announcement on ASX, the company updated that the full year metal production for FY19 from Nova exceeded the guidance and Tropicana production was within the guidance range. Production of Nickel from the Nova operation stood at 30,708 tonnes for FY19.


Production Summary (Source: Company Reports)

March ’19 Quarter Financial Highlights: During the March quarter, underlying EBITDA amounted to A$117 million and unaudited profit after tax amounted to A$45 million. The company reported a strong underlying quarterly free cash flow of A$89 million.



March ’19 Quarter Key Metrics (Source: Company Reports)

What to expect: The impressive operational performance from Nova and Tropicana is underpinning the company’s growth strategy focused on exploration and discovery.

Stock Recommendation: The stock of the company is currently trading close to a 52-week high level of $5.580. YTD returns on the stock stand at 50.14%. During the period, the company reported strong cash from operating activities at both Nova and Tropicana. Its current ratio for H1FY19 stood at 3.09x, better than the industry median of 1.88x, which implies the company is in a better position to address its short-term obligations than its peer group. Based on the foregoing and looking at the current trading level, we give a “Hold” rating on the stock at the current market price of $5.570 (up 2.202% on 24 July 2019).
 

BlueScope Steel Limited

Decent Liquidity Levels: BlueScope Steel Limited (ASX: BSL) is a technology leader and the largest global producer of metal coated and painted steel building products. NS BlueScope Malaysia has wrapped up the acquisition of YKGI Holdings Berhad’s Klang manufacturing facility.
 
H1FY19 Financial Highlights: For the first half of the financial year 2019, the company reported a net profit after tax of $624.3 million, up 42% on the prior corresponding period. Underlying NPAT during the period amounted to $613.5 million. Underlying EBIT during the period amounted to $849.6 million, up 62% on pcp. The balance sheet was also robust, with great flexibility. As at 31 December 2018, the company reported a net cash position of $127.5 million.


H1FY19 Key Metrics (Source: Company Reports)

What to expect: The company expects FY19 underlying EBIT to be approximately 10%, higher than FY18. The company stated that2H is expected to be softer than 1H FY 2019. However, it was also stated that the expectations are subject to spread, FX, and market conditions.

Stock Recommendation:Its RoE for H1FY19 stood at 9.6%, better than the industry median of 6.8%, which implies the company generated decent returns for its shareholders than its peer group. Its current ratio for H1FY19 stood at 1.89x, marginally better than the industry median of 1.88x, which implies the company is in a respectable position to address its short-term obligations. Hence, considering the aforesaid facts and current trading level, we recommend a “Buy” rating on the stock at the current market price of $13.070 (up 1.633% on July 24, 2019).
 

Sandfire Resources NL

June ’19 Quarter Key Highlights:Sandfire Resources NL (ASX: SFR) has an engagement in the production and sale of copper, gold and silver from the Group’s DeGrussa Copper-Gold Mine in Western Australia; development of Sandfire Resources America Inc.’s high-grade Black Butte Copper project; and exploration, evaluation and development of mineral tenements and projects in Australia and overseas, including investment in early stage mineral exploration companies. Recently, White Rock Minerals Ltd announced an update on the 2019 exploration program underway at its globally significant Red Mountain (JV with SFR) high-grade zinc and precious metals VMS project in central Alaska. Summer field exploration activities commenced in late May with on-ground activities including surface reconnaissance mapping, surface geochemical sampling (soils and rock chips), ground electrical geophysics (MT and CSAMT), downhole EM surveys and diamond drilling.

Recently, the company released its Quarterly activities update for the quarter ended 30 June 2019 wherein C1 cash operating costs for the Sandfire Group at the end of June was US$0.74 l/b as compared to US$0.92 l/b in the March quarter.  The contribution from the Monty Copper-Gold Mine increased, delivering 76,091t grading 7.9% Cu for the Quarter. The company executed cornerstone investment in Adriatic Metals PLC (ASX: ADT), following which its stakein it increased to 11.13% (previously 7.7%), providing increased exposure to Adriatic’s high-grade polymetallic projects in Bosnia-Herzegovina. As at 30 June 2019, the company had a cash position of $243.o Mn (Unaudited).

 

Production & Operations Data (Source: Company Reports)

What to expect:As per FY20 guidance, Copper and Gold production has been estimated at 70-75kt Cu and 38-42koz Au, respectively at C1 cash cost of US$0.90-0.95/lb.Updated Mine Plan, Mineral Resources and Ore Reserves completed for DeGrussa and Monty, underpinning mine life through until mid-CY2022. Black Butte Copper Project Feasibility Study progressing well and on-track for delivery in Q2 FY2020.

Stock Recommendation:The stock has generated a negative return of 7.09% in the past three months (as at 23 July 2019) and trading at close to a 52-week low level of $5.97. Moreover, Gold Production guidance of FY20 has been estimated lower than FY19 gold production. Hence, considering the aforesaid facts and current trading level, the stock can be avoided as of now at the current market price of $$6.670 (down 4.029% on 24 July 2019), and suggesting that investors should wait for few more catalysts that may drive the stock higher.

 
Comparative Price Chart (Source: Thomson Reuters)    

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