4 Resource Sector Stocks – SYR, IGO, GXY and BHP

Syrah Resources Limited (ASX: SYR)

SYR Details

Repair of fine graphite circuit got completed: Syrah Resources Limited recently opened the Balama Graphite Operation in Mozambique and was facing challenges with regards to itsfines graphite circuit dryer. The Group announced that the fines graphite circuit dryer (“Fines Dryer”) repair at the Balama Operation has now been completed ahead of schedule with total repair cost of approximately US$0.3 million. The Fines Dryer was recommissioned with assistance from equipment vendor specialists. Whilst on site, the vendor specialist re-examined the flake dryer as a precaution and confirmed there are no issues or damage with the flake dryer. With both the flake and fines circuit operational, the Balama processing team is focused on the continued ramp up and optimisation of production. Further details on the throughput performance post the Fines Dryer repair will be provided with Quarterly Update that will be released on 30 April 2018.
 

Overview of capacity and performance (Source: Company Reports)
 
The Company has made a long-term commitment to Mozambique, via the delivery of the Balama Graphite Operation, and is genuinely committed to the sustainability of the operation for the benefit of the people of Mozambique. JP Morgan Chase & Co., which recently became the substantial holder of Syrah Resources since 18 April 2018 by holding 14,923,588 securities and 5.02 per cent of the voting power, ceased to be the holder of the group on April 19, 2018. The share prices were down by almost 23.4 per cent in the past three months but it was seen that the prices started recovering in the last one week with favourable commodity prices. The shares price again fell by 1.5 per cent as on 23 April 2018, and we give a “Hold” recommendation at the current market price of $ 3.260.
 

SYR Daily Chart (Source: Thomson Reuters)
 

Independence Group NL (ASX: IGO)

IGO Details

Shift of focus from construction to delivery: Independence Group became the substantial holder of Arrow Minerals, which received $2.36 million (before costs) through a $1 million placement. Arrow also raised $1.36 million through its 2^nd tranche of equity raising. Through this placement, IGO has become Arrow’s largest shareholder with an 11% interest in the Company. IGO’s shares are subject to a voluntary escrow, with 50% of the shares escrowed for 6 months and 50% of the shares escrowed for 12 months. Subject to regulatory approval, IGO will be given the right to participate in future equity raisings on a pro-rata basis. The Company has shifted its focus from construction to delivery and discovery.


Share Price Movement (Source: Company Reports)
 
The Group delivered strong results for first half of FY18 and reported an increase of 59 per cent in revenue (A$354.8 million) as compared to prior year first half. The net debt was reduced by 14 per cent as compared to 1HFY17. It is expected that by FY2020, electronic vehicle material demand will become material and will require an additional quantity of copper, nickel and cobalt. This will benefit the group going forward. Since the start of the year, the stock price has been rising and is up by 10 per cent as on 20 April 2018 while the commodity prices stayed soft as at April 23, 2018 after the recent run-up as seen in the last one month. We maintain a “Hold” recommendation at the current market price of $ 5.350.


IGO Daily Chart (Source: Thomson Reuters)
 

Galaxy Resources Limited (ASX: GXY)

GXY Details

Mix Performance during March 18 Quarter: Down 2.9% on April 23, 2018,Galaxy Resources released its March 2018 Quarterly Report and reported a cash balance of US$60.8 million and no debt. As set out in the Quarterly Report, during the quarter, ASX advised that Galaxy’s classification has changed from a mining exploration entity to a mining producing entity. Accordingly, Galaxy is no longer required to lodge appendix 5B’s but will now be required to lodge preliminary final reports (Appendix 4E) and half yearly reports (Appendix 4D) within two months of the end of the relevant accounting period. Operations at Mt Cattlin have continued without any Lost Time Injuries and total mining volumes increased significantly by 32% over the previous quarter resulting in increased total mining costs included in production cash costs. Ore volume treated increased by 4% to 430,398 wmt, with ore feed grade of 1.11% achieved in line with expectations for the quarter but resulted in decline in production that is by 16 per cent on previous quarter. The result also entailed a decline in the average lithium price during the quarter. During the quarter, a drilling campaign supporting the Feasibility Study (“FS”) and Environmental and Social Impact Assessment (“ESIA”), was completed for James Bay Project. Earthworks commenced in preparation for new drilling campaign to start in Q2 2018 for Sal de Vida Project.


Galaxy Tenements (Source: Company Reports)
 
Following a record breaking year in several global lithium market indicators throughout 2017 (e.g. demand, spodumene supply, lithium pricing, etc.), Q1 of 2018 was defined by continued positive momentum in the rapidly accelerating market demand for lithium-ion battery applications. After a decline of 12.2 per cent in the past three months, the stock prices started moving up in the past one week (up 4.84%). But after the release of quarterly update, the stock price witnessed a dip. We give a “Hold” recommendation at the current market price of $ 2.940.
 

GXY Daily Chart (Source: Thomson Reuters)
 

BHP Billiton Limited (ASX: BHP)

BHP Details

Samarco Update: Recently, the 12^th Federal Court in Brazil has approved an additional 66 days for Samarco Mineração S.A. (Samarco), Vale S.A. (Vale), BHP Billiton Brasil Ltda (BHP Brasil) and the Federal Prosecutors will continue their discussions on the negotiation of the framework for the settlement of the Public Civil Claims related to the Samarco dam failure. The extension will end on 25 June 2018. Until that time, the interim security arrangements and the current suspension of legal proceedings will remain in place. The Group announced its operational review for nine months period ending on 31 March 18 and revealed that its full-year production guidance will remain unchanged for Petroleum, Metallurgical Coal and Energy Coal, and the Group’s copper equivalent production is expected to increase by 6% in the 2018 financial year.


Guidance summary (Source: Company Reports)
 
All its major projects under development are on track. The exit process for its Onshore US assets is progressing to plan and expects to receive the bids by June 18 and simultaneously it is exploring potential asset swap opportunities and exit via demerger or Initial Public Offering. The stock price rose up by 7.64 per cent in past one month and was up by 1.19 per cent on 23 April 2018. We maintain a “Hold” recommendation at the current market price of $31.230.
 

BHP Daily Chart (Source: Thomson Reuters)

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