Iluka Resources Ltd


ILU Details

·       Sierra Rutile Acquisition drove the stock higher: Iluka Resources Ltd (ASX: ILU) stock surged over 5.03% on December 12, 2016 driven by positive sentiments and their acquisition move for Sierra Rutile Ltd. Overall transaction costs were A$393 million, which comprise SRL equity of A$375 million (£215 million) and A$18 million of transaction costs. The group views Sierra Rutile as a strategic acquisition given their long-life rutile mining and processing operation with material expansion options. Sierra Rutile offers quality mineral sands operation which helps for a better service to the high-grade titanium dioxide feedstock market. Hence, the group believes that Sierra Rutile offers enhanced portfolio flexibility in relation to capital expenditure timing. The overall pro-forma gearing has been over 32% as at 30 June 2016 while the transaction is forecasted to be earnings per share accretive from 2017. For the coming 3 to 5 years, Iluka expects a capex of over US$160 million for Lanti dry mine, Gangama dry mine and Sembehun mine projects. Sierra Rutile is planning for an additional 250 tonnes per hour (tph) of ore throughput in Lanti dry mining while the group is planning for a major expansion of 500 tph. Sierra Rutile is planning for a further 250 tph throughput in Gangama dry mining while the group is again planning to expand 500 tph for the project.
·       Recommendation: ILU stock rose over 17.8% in the last four weeks (as of December 09, 2016) and we maintain a “Hold” recommendation at the current price of $7.30
 

SRL Resources, as at September 2015 (Source: Company Reports)
 
Origin Energy Ltd


ORG Details

·       Positive results for Waitsia gas project: Origin Energy Ltd (ASX: ORG) stock rose over 3.7% on December 12, 2016 with the energy sector gains at the back of OPEC developments while the group’s subordinated notes (ORGHA) have been suspended from quotation at the close of trading on December 12, 2016 pending the full redemption of the Notes on Thursday, December 22, 2016. Meanwhile, ORG’s joint venture partner AWE reported positive results for their Waitsia gas project in its preparations for Stage 2. The Joint Venture partners for the project approved 2017 development activities budget and final Stage 2 appraisal wells, Waitsia-3 and Waitsia-4, for drilling in April-June 2017. The Gas tender process is showing good progress getting bids of more than double the Joint Venture’s 2P Reserves. The Project is on track while the Operator is targeting FID in late 2017. AWE reported that they are getting good response from potential customers as bid volumes are more than double the Joint Venture’s 2P Reserves, indicating huge demand for the project. Waitsia Stage 2 has the capability to offer 10% of WA’s domestic gas demand, 100 TJ per day, for 10 years.

·       Recommendation: ORG stock surged about 26% in the last four weeks (as of December 09, 2016) while we maintain a “Buy” on the stock at the current price of $6.79

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