Magnis Resources Ltd (ASX: MNS)

MNS Details

Witnessing a continued rally at the back of achieving key milestones and Lithium-ion battery market scenario: Magnis’ stock continued to rally with 10.4% rise in price on September 15, 2017. The group recently announced that Queensland Premier Annastacia Palaszczuk has publicly expressed support for the Townsville Lithium Ion Gigafactory plant project following the submission of a scoping study that demonstrates the project’s positive economic impact. The consortium behind the project is receiving strong support from local government and State Members of Parliament. Further, significant progress is being made in funding discussions with relevant State and Federal government bodies, along with private enterprise including local and overseas groups within the energy sector. As part of the funding discussion process, land valuation work has been completed on the 400-hectare site in Woodstock, Queensland that has been selected as the location for the Townsville Gigafactory. In parallel, strong progress is being made on the technical development of the project, including qualification of manufacturing input materials and budget pricing while engagement with major equipment vendors is ongoing and budget costs received to date have been consistent with scoping study estimates.

In addition, the development on signing of a Memorandum of Understanding (MOU) with German Lithium-ion battery consortium TerraE-Holding GmbH (TerraE) for the supply of raw materials is also another positive for the group. Given the latest key mile stone of Townsville Gigafactory and increasing demand for graphite products, we maintain a “Buy” recommendation on the stock at the current price of $ 0.42

South32 Ltd (ASX: S32)

S32 Details

Mining sector stocks pulled down on ASX: South32 stock slipped by 2.8% on September 15, 2017 along with many other mining sector stocks while North Korea fired second missile over Japan and tension prevailed across the globe. Further, S32 traded ex-dividend on September 14, 2017. In the recent reporting season, South32 Ltd had posted a net profit of US$1.2 billion against loss of US$1.6 billion in FY16 on revenue of US$6.95 billion (up 20%) for FY17, led by broad recovery in commodity prices and portfolio’s operating leverage. The group generated underlying EBITDA of US$2.4 billion in FY17 as the higher prices for many commodities gave rise to US$1.1 billion increase in sales revenue, despite lower volumes with an operating margin of 39%. Underlying EBIT increased by US$1.3 billion (363%) to US$1.6 billion, further benefitting from a reduction in depreciation and amortisation following the recognition of non-cash impairment charges in FY16.  Moreover, it has demonstrated a robust performance across its aluminium supply chain, including record production at Mozal Aluminium. For FY17, the company incurred a total capital expenditure (including equity accounted investments, intangibles and capitalised exploration) of US$356 million. Further, the group’s net cash balance appreciated considerably during the year to finish the period at US$1.6 billion and the increase in cash and cash equivalents to US$2.7 billion led by the cash management activities that the group undertakes on behalf of the manganese joint venture which are offset by a commensurate increase in other interest-bearing liabilities.

The stock has moved up 47.5% in last one year (as at September 14, 2017) owing to improving financial performance and is trading at higher levels.We give a “Hold” on the stock at the current price of $ 3.11

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