4 Resource Stocks – WSA, NCM, NST and WHC

Western Areas Ltd

WSA Details

Improved Nickel forecast: Western Areas Ltd.’s (ASX: WSA) stock surged 9.3% on March 27, 2018 after the nickel future rose higher as now the trade war between two countries China and United States is somehow seem to be fading away a bit with work said to be starting on trade resolution. WSA is also gaining momentum owing to positive sentiments with improved nickel forecasts unveiled through to FY 2020.
 

1H 18 Financial Performance (Source: Company Reports)
 
Meanwhile, for 1H 2018, WSA delivered a 2.1% rise in sales revenue of A$115.8m, while NPAT grew 579.5% to A$3.5m, including $3.6m gain on Bluejay Mining equity sale. In 1H 2018, EBITDA has significantly improved, with a rise of 26% over the underlying EBITDA for 1HFY17 and 59% higher than underlying EBITDA in 2HFY17, despite a planned reduction in sales volumes in 1HFY18. Further, EBITDA margin has improved to 31.4% due to an absolute cost reduction, the impact of successful new offtake contracts and a marginal increase in nickel prices. Additionally, during 1H 2018, WSA has continued to develop its organic growth projects, with the Mill Recovery Enhancement Project (“MREP”) construction being completed on time and on budget and now entering the commissioning stage. WSA’s other main growth asset, the Odysseus deposit, is now expected to be a larger and longer mine life project than originally announced. Based on the foregoing, we give a “Hold” recommendation on the stock at the current price of $3.29


 WSA Daily Chart (Source: Thomson Reuters)
 

Newcrest Mining Limited

NCM Details
 
Mining operation recommences at Cadia: Newcrest Mining Limited’s (ASX: NCM) stock fell 1.7% on March 27, 2018 after providing an update on its Cadia operation. The company has recommenced the mining operations at Cadia East. The company had suspended all the mining and processing operations at Cadia, effective from 10 March 2018 after a limited breakthrough of tailings material was identified at the northern tailings facility embankment. The mining will initially start from Panel Cave 1 and then will recommence from Panel Cave 2. The mined ore are stockpiled at surface until processing recommences. The processing is still suspended. Moreover, NCM has undertaken work on multiple recovery scenarios, including alternative tailings locations such as the old Cadia Hill open pit. NCM is continuously working with the NSW regulators on permitting the Cadia Hill open pit tailings option and has commenced procurement of some of the necessary equipment for utilization if approved. However, a prohibition notice issued on depositing tailings in the northern tailings facility is still in place. On the other hand, Wafi-Golpu Feasibility Study prepared by the Wafi-Golpu JV (WGJV) project team, was updated to incorporate the findings from the earlier Pre-Feasibility and Feasibility Studies announced in February 2016, interpretation of the additional orebody data derived from further drilling and geotechnical studies, together with further work undertaken on mine design, hydrology, tailings and port and power options. NCM stock has fallen 11.18% in three months as on March 26, 2018 and is also trading at a very high P/E. Based on the foregoing and performance drag from Cadia, we give an “Expensive” recommendation on the stock at the current price of $19.82
 

NCM Daily Chart (Source: Thomson Reuters)
 

Northern Star Resources Ltd

NST Details
 
Acquiring Westgold Resources’ South Kalgoorlie Operations: Northern Star Resources Limited’s (ASX: NST) stock fell 2.1% on March 27, 2018 while giving away some of the gains of about 8.9% witnessed in last one month with gold price movement. The company has recently agreed to acquire Westgold Resources’ South Kalgoorlie Operations for a total consideration of A$80 million. The deal includes the project’s operating processing facility, which has an annual throughput capacity of 1.2 million tonnes, a JORC Resource of 4Moz, including 250,000oz in Reserves, and 800sqkm of prospective gold tenure. South Kalgoorlie Operations is currently producing at the rate of 30,000-40,000ozpa. Moreover, the deal will ensure NST meet its 300,000 ozpa production target from organic sources at its Kalgoorlie Operations. The settlement of the transaction is due for completion on April 01, 2018. Meanwhile, NST stock has risen 14.10% in three months as on March 26, 2018 but is trading at a relatively high P/E. Therefore, we give an “Expensive” recommendation on the stock at the current price of $6.81
 

NST Daily Chart (Source: Thomson Reuters)
 

Whitehaven Coal Ltd

WHC Details
 
Acquiring Winchester South coking coal project from Rio Tinto: Whitehaven Coal Limited’s (ASX: WHC) stock rose 4.7% on March 27, 2018 after the recovery in the market with regards to coal price forecasts. WHC has also recently announced its plan to acquire Rio Tinto’s 75% interest in the Winchester South coking coal project for total cash consideration of US$200 million. The company will be paying US$150 million of the consideration on completion and US$50 million will be payable during 12 months post completion. The Winchester South project is a significant strategic acquisition for WHC as it complements the Vickery project in the Gunnedah Basin. This will be another high-quality asset, which will help WHC to respond to the strong and growing demand for premium coking coal, that exists in Asian markets. However, the acquisition will take place after the normal regulatory approvals and a number of other customary conditions precedent for a transaction of this nature. The completion of the transaction is expected to occur in the second half of 2018.
 

ROM Coal Production (Source: Company Reports)
 
WHC has been witnessing lower production at Narrabri and Gunnedah as seen in the latest half year result and might need to tighten the respective operations. Meanwhile, WHC stock has fallen 4.7% this year to date as on March 26, 2018 while inching towards its 52-week high price. As of now, we give an “Expensive” recommendation on the stock at the current price of $4.46
 

WHC Daily Chart (Source: Thomson Reuters)

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