Independence Group NL (ASX: IGO)

Strong free cash flow: After the update on third quarter activities, IGO stock fell by 4.8 per cent on May 01, 2018. A Record Quarter (ending on 31 March 18) for free cash flow, primarily resulting from higher commodity prices and timing of sales receipts, has further strengthened the balance sheet, with a closing cash balance of A$70.3 million for the Quarter, notwithstanding a debt repayment and interim dividend payment being made. The 12-month rolling lost time injury frequency per million hours worked (LTIFR) to 31 March 2018 was 1.97, down from 2.61 on 31 December 2017. During the Quarter, IGO and the Ngadju Native Title Aboriginal Corporation advanced negotiations on the trust arrangements enabling the commencement of production royalty payments in accordance with the Nova land access agreements, which were made in April 2018. IGO also completed its 2018 stakeholder engagement survey as part of the ongoing process to understand matters that were material to its stakeholders.


Cash Flow Reconciliation for 3Q18 (Source: Company Reports)

Nova’s sales revenue for the Quarter (3Q18) was A$95.9 million, compared to the 2Q18 result of A$78.3 million. Revenue to IGO’s account was A$54.3 million, in line with the anticipated production profile. Underlying EBITDA margin for the Quarter was strong at 57%. Cash costs and AISC were A$756/oz and A$1,093/oz respectively. Net IGO cash inflow for the Quarter was A$19.0 million, which included a debt repayment of A$28.6 million and an interim dividend of A$5.9 million. The Group released an updated report on the progress of exploration and drill definition of the Bentayga Lens at the Bentley VHMS deposit at IGO’s Jaguar Operation. IGO commenced the development of a 240 meters underground drill drive at the Bentley Mine during 3Q18, which is 60-70% complete and this drill drive will provide an early mining access to the Bentayga Lens and is expected to be completed by 1Q19. On completion of the development, an approximate 8,000 meters diamond drill program, focused on Mineral Resource definition, will commence. However, it appeared that the market was expecting higher mined tonnage and grade. The stock was up by 28.29 per cent in last six months (as at April 30, 2018), and we give a “Hold” recommendation at the current market price of $4.92.


Bentayga and Arnage Long Section (Source: Company Reports)
 

Saracen Mineral Holdings Ltd (ASX: SAR)

More Reserve for Growth: The Group released its drilling results and confirmed an outstanding growth potential across the portfolio. Thick, high grade results pointed to further mine life extensions at both Carosue Dam and Thunderbox. Extensional drilling programs at both of the Company’s key operational centres continued to demonstrate the exceptional growth potential close to its existing mills. The latest results show that its organic growth strategy is firmly on track and, in fact, gathering momentum on a number of fronts. The Group is ramping up its exploration efforts, drilling out a host of targets ranging from immediate extensions to known deposits to mine corridor anomalies targeting new discoveries. Drilling at Carosue Dam has continued with three diamond rigs operating at Karari and Whirling Dervish.


Cash Building Trend (Source: Company Reports)
 
During the current quarter, the focus will be on defining the recently identified extensions, targeting Ore Reserve growth and additional mine life. During April, the development of a new drill platform was completed 120 meters below the existing 2070 drill drive at Carosue Dam Operations. Drilling at Whirling Dervish has continued to focus on extensional drilling in the south and in-fill in the north. It upgraded the FY18 guidance to 310-315,000oz @ AISC of A$1,100-1,150/oz. The stock is rising since past one year that is by 96.88 per cent and after a positive update on drilling, the stock price jumped up by 3.968 per cent on May 01, 2018. We give a “Hold” recommendation at the current market price of $1.965 as the stock has a potential to grow more.

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